Almost ten years after Bernie Madoff pled guilty to the largest Ponzi scheme in U.S. history, we are still talking about the nefarious financier. The reason? Experts say the same thing could easily happen again.
“Ponzi schemes have been around for 150 years and crop up every year,” says Diana Henriques, a former New York Times reporter and author of Wizard of Lies, which chronicles the Madoff scandal. “I think the relevance [of Madoff’s story] is how easily ordinary people can get trapped in a web of deceit like this. It is happening right now in a city near you — it is the simplest fraud known to man, robbing Peter to pay Paul.”
The new HBO feature film, Wizard of Lies, based on Henriques’ book, unpacks Madoff’s masterful con. Robert De Niro stars as a steely Madoff, and Michelle Pfeiffer portrays his clueless wife, Ruth. Madoff’s two anxious sons, Mark and Andy, who reported their father to the FBI, are played by Alessandro Nivola and Nathan Darrow, respectively.
Wizard of Lies opens during the financial crash of 2008. For nearly three decades, Madoff ran a massive Ponzi scheme in which he used the funds from one investor to pay other investors. When the market crashed, investors wanted their money back, and Madoff didn’t have it.
Collectively thousands of investors lost billions of dollars. Those duped included prominent figures like Steven Spielberg, Kevin Bacon, and holocaust survivor Eli Wiesel, as well as smaller investors who put their retirement savings in Madoff’s fund. (Several investors were so shaken by their losses they committed suicide.) Eventually Madoff confessed to 11 felonies and was sentenced to 150 years in prison. The Madoff family has since fallen apart: Ruth Madoff has cut off all contact with her husband, their oldest son, Mark, committed suicide in 2010, and his younger brother, Andy, died of cancer in 2014.
Following the financial crash of 2000, the Obama administration put certain reforms into place like Dodd-Frank Wall Street Reform and Consumer Protection Act, and the “Fiduciary Rule,” which essentially says that brokers must act in their client’s best interest. And while these laws wouldn’t necessarily help Madoff’s direct investors, they could protect ordinary people from shady brokers. Although, the Trump administration has said they would like to see many of these reforms removed, and the future of Wall Street regulation remains unclear.
In the meantime, Henriques says, investors should, of course, do their homework, and ask lots of questions.
“A lot of the reforms that were put in place to protect investors don’t really help with Ponzi schemes. I am afraid the investor has to be their own cop,” Henriques says. “You need to make sure you are dealing with a clearly regulated financial entity and make sure the same guy who is managing your money doesn’t also hold the stock and bonds.”