Bernie Madoff documentary: history's largest Ponzi scheme

Today, it's virtually impossible to violate rules. Fourteen months later, to his own sons: It's all just one big lie. Sixty-five billion dollars. The biggest Ponzi scheme in history.

And nobody caught it. The MATERIUM team investigated this case through real documents: the SEC complaint, the records of the federal court in Manhattan, and the inspector general's report.

His name was Bernard Madoff. A Wall Street legend. You'd think big con men end up caught by the police. They had this one in sight, again and again.

Wall Street's cops got six complaints about him. They examined him three times. Investigated him twice. And let him keep going.

And many of his clients didn't even know his name. They handed over their savings through their lifelong bank. In Mexico. In Argentina.

In Spain. In the last chapter, Ruja Ignatova needed packed stadiums. Bernie only needed his name. Today, you'll learn how he fooled his own watchdogs.

Why thousands of Latin American families trusted him with their money without ever meeting him. And where those sixty-five billion dollars are today.

Bernie grew up in Queens, a plumber's son. In nineteen sixty, he opened his own brokerage firm. I started with five thousand dollars. Saved from lifeguarding and installing sprinklers.

That's Bernie's version. Remember it. He rarely mentioned that his father-in-law lent him fifty thousand dollars… and handed him his first clients. But he wasn't a fraud: he was a genuine innovator.

His firm came to handle one in every twenty trades on the New York Stock Exchange. And he chaired the Nasdaq. That's the first lever of the con: AUTHORITY. Why would a man like that run a scam?

The answer lies in his other business. Bernie didn't promise to make you rich. He promised something more tempting. Ten, twelve percent a year.

If the market fell, his fund made a little. If it rose, it made a little too. Those returns weren't high. They were boring.

And that was exactly the impossible part: no market on earth is boring. Boring… for almost everyone. The accounts of Jeffry Picower, a Palm Beach millionaire, gained nine hundred fifty percent in a single year. Keep that name in mind.

And getting into the club wasn't easy. He doesn't take just anyone. If he lets you in, it means he chose you. That's the second lever: EXCLUSIVITY.

If a man like that told you he'd chosen you… would you ask him to explain? Maybe this sounds familiar. If you or someone in your family was ever offered an investment that never loses, tell us in the comments. Your story could be the warning another family needs.

And now you'll see why it never lost. Now come closer. This happened two floors below his office. On the seventeenth floor, barely twenty people worked.

And not a single stock was ever bought there. He admitted it himself, before the judge. I never invested these funds, as I had promised. They were deposited in a bank account at Chase Manhattan Bank.

Account seven-oh-three. With the new investors' money, he paid the old ones who wanted theirs back. Hold on to that number. One day, someone will open it looking for the sixty-five billion.

The rest was paper: statements with perfect trades, picked out of yesterday's newspaper. And if an auditor asked for an old ledger, they printed it that night… and aged it in a freezer. It was all fake. The night before an auditors' visit, the team celebrated with a lavish dinner.

To fooling the auditors. To fooling KPMG. But that same programmer started to get scared. He left a note in his drawer.

I won't lie anymore. Next time, I'll say: ask Frank. Bernie ordered them paid whatever they wanted.

But a Ponzi needs new money. Every single month. Where did it come from? Bernie didn't chase clients.

Upscale funds and trusted old banks brought them to him. It's a conservative fund. Low risk. Ideal for someone like you.

In return, they collected fat fees. The biggest, Fairfield Greenwich, entrusted him with more than seven billion. Santander's clients, more than two point three billion euros. That's the third lever: TRUST IN YOUR OWN.

Your banker. Your bank.

But in Boston, one man was looking at Bernie's numbers. And he didn't believe them. His name was Harry Markopolos. In nineteen ninety-nine, a partner at his firm told him about Bernie: the French aristocrat René-Thierry de la Villehuchet.

It took me five minutes to know it was a fraud. That straight line doesn't exist in finance. Only in geometry class. He took it to the SEC in two thousand.

And in two thousand one. In two thousand five, he handed them this. Twenty-nine red flags. He came to fear for his life: by his own account, he kept a loaded shotgun at home.

The SEC roars like a mouse… and bites like a flea. By the way: if you know a con man who also hid behind his prestige, write it in the comments. We'll dig into the most requested ones. Because that flea had already had Bernie between its teeth.

And let him go. Nineteen ninety-two. A pair of Florida accountants raise money from thirty-two hundred people. It's managed by an unnamed broker.

It was Bernie. The SEC ordered all of it returned. And the money showed up. Down to the last dollar.

Nobody asked where it came from. It came from Bernie's other clients. Note that trick: plugging one hole with someone else's money. Sixteen years later, that trick will explain where the sixty-five billion went.

In two thousand five, the SEC sent examiners to his office. Young ones. Facing a legend. Did you know I'm on the short list to head the SEC?

We'd need to see your trading records, Mr. Madoff. The veins in his neck were bulging. He's a very powerful man.

And very well connected. Tread carefully. What they didn't know is that he was watching them too. According to DiPascali, Bernie went through an examiner's briefcase.

Inside was an article raising doubts about him. These sons of… are messing with me. Before the SEC questioned the Fairfield people, Bernie called them. He didn't know the call was being recorded.

Obviously, first of all, this conversation never took place. May, two thousand six: the decisive moment. Investigators ask him where he keeps his clients' stocks. Bernie gives them an account number at the DTC, the depository that holds the nation's securities.

A single phone call would have exposed him. Later, in prison, he described what he thought that day. I thought it was the end game. Over.

Monday morning, they'll call DTC… and this will be over. On Monday, nobody called. Not that Monday, not the next. It's astonishing they didn't catch me sooner.

The inspector general called it the most egregious failure of the investigation. Bernie kept going for another two and a half years. And here's my question for you. Who was more to blame: Bernie, or the SEC, which never made a single call?

Tell me in the comments. Because Bernie, meanwhile, was laughing at them in public. Back to that two thousand seven panel. Someone asks him about his ties to the regulators.

I'm very close to them. In fact, my niece even married one. He wasn't lying. But the inspector general found no sign of favors.

Bernie didn't need any.

A year after that laugh, the whole market came crashing down. September, two thousand eight. Lehman Brothers collapses. Everyone wants their money back at once.

For a pyramid scheme, it's the only thing that kills. In December, his clients ask for about seven billion dollars. Account seven-oh-three has two hundred thirty-four million left. The statements said sixty-five billion.

Where was the rest? The police won't be the ones to find out. It'll be a man who spends more than fifteen years on the trail. On December third, Bernie breaks down in front of his finance chief.

Frank… it's over. I'm finished. And still, on December ninth, he wants to pay out bonuses early: one hundred seventy-three million in checks, for family and friends. With the market in ruins?

His sons can't make sense of it. December tenth, two thousand eight. Mark and Andrew walk into their parents' apartment. Bernie asks them to sit down.

It's all just one big lie. Basically, a giant Ponzi scheme. Silence. That same day, Ruth withdrew ten million dollars from an account.

She was never charged with anything. That night, his sons called their lawyer. And he called the authorities. The biggest con man in history wasn't caught by the SEC.

Nor the FBI. He was turned in by his own sons. The next morning, the FBI knocks on his door. We're here to find out if there's an innocent explanation.

There is no innocent explanation. That afternoon, the news goes around the world. And in thousands of homes, far from New York, the phone starts ringing. Remember the clients who had never heard his name?

That week, they heard it for the first time. In Mexico, a retired businessman: I found out when Santander called to tell me what I'd lost. They told me it was conservative. Low risk.

He took part of my retirement. Like him, clients from across Latin America and Spain. Santander offered to compensate its private clients. On one condition: waiving the right to sue.

Most of them signed. In New York, Nobel Peace laureate Elie Wiesel lost his life savings. Psychopath — it's too nice a word for him. And René-Thierry de la Villehuchet, the aristocrat who put Markopolos on the trail?

He had lost everything. His clients' money, too. Less than two weeks after the arrest, he took his own life. It wasn't just money.

It was the shame of having trusted. And of having led others to trust. If you have parents or grandparents with their savings in a fund that always wins, send them this video. Maybe they don't need it today.

Hopefully they never will. If you think it could help someone, hit like: it helps this reach more people. Because Bernie still had to face his victims. Face to face.

March, two thousand nine. Bernie pleads guilty to eleven felonies. I knew what I was doing was wrong. Indeed, criminal.

I am deeply sorry. When I began, I believed it would end shortly. But it proved difficult. And, ultimately, impossible.

Impossible. The same word as in two thousand seven. He said it started in the nineties. The judge and other witnesses, much earlier.

Once again, Bernie's version. In June, a victim speaks: a young man who invested to care for his disabled brother. I hope his jail cell becomes his coffin. The judge sentences him to one hundred fifty years in prison.

The maximum. But the harshest sentence came from no judge. Two years after the arrest, to the day, his son Mark took his own life. In twenty fourteen, cancer took Andrew.

I know I'll die in prison. I lived the last twenty years of my life in fear. He died in prison in twenty twenty-one. No one in his family claimed his ashes.

But while Bernie grew old in his cell, that man was already knocking on doors. His name was Irving Picard. And the door hiding the most belonged to Picower's widow. Where are the sixty-five billion?

Nowhere. They never existed. They were paper balances: invented profits. The real money lost was less than a third.

And much of it had left years before. To pay other clients. The nineteen ninety-two trick. Picard chased it everywhere.

Banks. Funds. And clients who had cashed fake profits without knowing it: half the direct investors had taken out more than they put in. Many had to pay it back.

Picower's widow returned seven point two billion. At the time, a U.S. record. JPMorgan, the bank behind account seven-oh-three, ended up paying more than two billion. JPMorgan never shut down or seriously questioned account seven-oh-three.

From prison, Bernie pointed the finger at others. Everybody was greedy. Between the trustee and a government fund, nearly nineteen billion dollars has been returned. Many victims got back everything they put in.

Others didn't. And none of them got back the years of anguish. Take this with you. Bernie didn't fool the world with a brilliant idea.

He fooled it with a résumé. His prestige convinced clients not to ask. And the watchdogs, not to check. The SEC publishes the red flags of a Ponzi scheme: overly consistent returns, secretive strategies, statements that don't add up.

Madoff had them all. And almost no one wanted to see them, because he was Madoff.

Law number six of the Manual of Deception says this. Prestige is the perfect alibi. Same con. New disguise.

Law number six: prestige is the perfect alibi. Ten left. In the next chapter: Madoff used his prestige in New York. The next one bought himself a knighthood in the Caribbean… and took the savings of half of Latin America.

See that code in the corner? If I were you, I wouldn't scan it. Of course, that's exactly what a con man would tell you. Link in the description and in the pinned comment.

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