Bernie Madoff (2009): Redemptions in a crashing market

After the arrest, court-appointed professionals found that the advisory side had not been executing the reported strategy for customers at the scale the statements implied. Customer money had been commingled and used to meet withdrawals and personal outflows, a pattern the plea allocution accepted.

Redemption requests surged in late 2008 as markets fell. Madoff told his sons, who worked at the firm, that the advisory business was a fraud; they contacted counsel, who notified federal authorities. The FBI arrest followed the next day. The criminal case did not go to a contested trial on guilt. The March 2009 plea, the June 2009 sentencing transcript, and later prosecutions of aides and family members supplied the factual core that civil recovery then used.

Harry Markopolos and others had submitted analyses to the SEC as early as 2000 arguing that the reported returns could not be real. Examinations occurred; they did not stop the advisory business. The SEC Office of Inspector General’s 2009 report, Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme, reconstructed those contacts. It is a primary document for why the case is taught as a regulatory failure as well as a fraud.