Bernie Madoff, a Wall Street financier who was handed a 150-year prison sentence after pleading guilty to a Ponzi scheme in 2009, has died in prison.
Mr Madoff’s firm, Bernard L Madoff Investment Securities, became one of the largest market-makers and were investigated on eight separate occasions by the US Securities and Exchange Commission because of the exceptional returns it made.
Following the global recession in 2008, investors who were hit by the financial crisis attempted to withdraw around $7 billion from Mr Madoff’s funds – but he was unable to find the money to cover it.
Madoff was found guilty of executing the largest Ponzi scheme in history, with thousands of investors being defrauded out of tens of billions of dollars over at least a 17-year period. It was found that Madoff deposited client funds into a single bank account which was then used to pay existing clients who wanted to cash out.
What is a Ponzi scheme?
A Ponzi scheme is a fraudulent investing scam which promises a high rate of return with little risk to investors. They are often seen as ‘get rich quick’ schemes where investors are paid with their own money, or money from earlier investors. Often, there is no actual investment scheme in place, with the money being siphoned off by the individual or business running the scheme.
While the case related to Bernie Madoff was incredibly high profile, Ponzi schemes are often created for all levels of income and affect investors in various financial brackets.
Ponzi schemes tend to bottom out and are exposed when the pool of new investors dries up, meaning there is not enough money to go around and fund withdrawals. In this sense, Ponzi schemes have been likened to pyramid schemes, which are also based on using new investor’s funds to pay earlier backers.
What punishments are given for running Ponzi schemes?
The severity of the punishment someone can receive if they are found guilty of running a Ponzi scheme will depend on a number of different factors, such as the amount of money involved and whether they are also found guilty of committing other related offences.
For example, in 2020, a financial services director was found guilty of conning investors out of millions of pounds and was jailed for 14 years, though in May 2021, that prison sentence was reduced by four years.
What should you do if you are being accused of running a Ponzi scheme?
If you find yourself accused of running a Ponzi scheme, or are concerned about a potential investigation, contact our specialist serious fraud and business crime solicitors today for expert advice.
Our highly regarded team have a wealth of combined experienced in handling a wide range of complex and high-value serious fraud and business crime matters. We are able to advise individuals and companies at every stage of the criminal justice process, from initial investigations to potential court proceedings.
Contact our serious fraud and business crime solicitors for advice about Ponzi schemes
If you are being investigated for alleged involvement in a Ponzi scheme, please get in touch with our expert white collar crime lawyers for advice and legal representation.