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#Financial Crime Prevention

Madoff the movie - a story that you couldn't make up

International Compliance Association

Bernie Madoff , money laundering , Ponzi , Securities and Exchange Commission , securities fraud

This year Hollywood star Robert De Niro is set to star as disgraced financier Bernard Madoff, in an HBO movie which he will also produce.

The case of Bernard Madoff’s Ponzi scheme is pretty stunning and is referenced in ICA's Financial Crime Prevention Diploma material.

As far as I know, Mr De Niro has not taken the ICA Diploma (as yet, but his application is most welcome).

The classic Ponzi

A Ponzi scheme operates by paying phoney returns to investors, utilising other client’s money.

Simply put, the first tranche of investors are paid a slice of the cash deposited by the second tranche, the second tranche are paid a slice of the cash deposited by the third, and so on. This normally ends in one of two ways – the discovery or disappearance of the operator.

A real thriller

For anyone not familiar with it, Bernie Madoff’s fall from grace was quite remarkable. I won’t spoil the finer details of the plot for you, but suffice to say it contains many twists and turns, so should make for compelling viewing.

At the risk of scripting the trailer (unfortunately I don’t have the gruff US accent required for the voiceover), the failure of the Securities and Exchange Commission (SEC) to detect the massive Ponzi scheme perpetrated by this revered investment adviser sent shockwaves through the financial world and also brought the SEC’s reputation under the spotlight.

The Madoff case

In June 2009, Bernie Madoff was given the maximum prison sentence of 150 years for masterminding the scheme that effectively robbed investors of 65 billion US dollars (40 billion pounds sterling). He received the maximum sentence on all eleven charges - which included both securities fraud and money laundering.

Of course, this was not the end of the story. Far from it…

  • The litigation on behalf of those investors who lost their money continues. Particular focus has fallen on whether managers of the Madoff feeder funds could or should have known that something was amiss
  • Ponzi schemes have become a high priority for US regulators and Investigators. According to Timothy A Gallagher, the FBI’s section chief for financial crimes “Ponzi schemes are one of our top priorities within financial crimes….right up there with corporate fraud and insider trading”
  • Tragically, on 11 December 2010, the second anniversary of his father’s arrest, Mark Madoff committed suicide in his New York apartment.

Top billing

The publicity and furore surrounding the Madoff case has undoubtedly driven up the profile of the Ponzi scheme, and thereby the cultural and regulatory groundswell against it.

With this increased public interest comes notoriety for Bernie Madoff, itself further feeding the curiosity. And we therefore come full circle, back to the film.

I’d count myself as a film fan and I think I have read enough around the plot to suggest it is unlikely this one will have a happy ending.

But I suppose you never can tell in Hollywood…


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