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The Man Who Stole $65 Billion - Largest Ponzi Scheme In History (Bernie Madoff) - YouTube
Channel: The Infographics Show
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Sometimes when a lot of money gets stolen,
we canât help but root for those who took
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it.
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We might look at a recent heist that must
be the closest thing to a real-life Oceanâs
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Eleven, when a bunch of old men (the Old blaggers)
stole millions of dollarsâ worth of precious
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stones from a vault in London in 2015.
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Itâs thought most of the men were arrested,
but much of the bounty remains at large.
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This is regarded as one of the biggest heists
in history.
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We might smile when we hear about these aged
robbers, but thereâs one kind of theft that
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people almost always take a dim view of, and
that is the financial scam.
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Today we are going to look at the biggest
financial scam in history, in this episode
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of the Infographics Show, The Man Who Stole
$65 Billion.
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Before we talk about how this $65 billion
was stolen, letâs learn something about
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the man who took it.
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His name is Bernie Madoff.
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Unfortunately for him, he is still alive,
at the ripe old age of 80.
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He was born on April 29, 1938, in Queens,
New York.
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Madoffâs roots are European, with his parents
having Polish, Austrian, and Romanian heritage.
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His parents, Ralph and Sylvia, didnât have
an easy time of it in New York, especially
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as they had to live through what is now known
as The Great Depression.
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Ralph was a plumber and Sylvia was a housewife,
which didnât exactly afford them luxuries
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in life.
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They got involved with finance in the 60s,
but just as the son would later enter the
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world of dodgy dealings, his parents were
at one point shut down by the U.S. Securities
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and Exchange Commission because Sylvia, whose
name was on the company, had âfailed to
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file reports of their financial condition.â
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The company was closed, but they didnât
have to pay anything in fines or payments
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to customers.
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This was 1964, when young Bernie was just
26.
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Itâs also said that Ralph owed a lot of
money in federal taxes, and perhaps thatâs
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why the company was put in Sylviaâs name.
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They both gave up the ghost in the 70s anyway,
but there can be no doubt that these two sketchy
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parents set their son off on a mission to
cause financial mayhem.
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According to reports, it took Madoff some
time to get into finance, and like any young
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buck, he was more interested in girls and
sports, mainly swimming.
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In 1959, he married a girl he had met in high
school, and in 1960, he graduated from Hofstra
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University in Long Island.
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He started law school, then dropped out of
law school, and with $5,000 he had earned
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as a lifeguard and part-time work installing
sprinkler systems, Madoff took his first step
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into his parentsâ financial footsteps.
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On top of the 5,000, he borrowed a further
$50,000, and started an investment firm called
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Bernard L. Madoff Investment Securities, LLC.
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â perhaps now the most infamous investment
firm ever created.
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The firm looked good from the outside.
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It was known as a solid âmarket maker.â
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This is described as being a person or a brokerage
house that âis always prepared to buy and
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sell securities in order to provide liquidity
to the markets,â according to the website,
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investing-answers.
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In simple terms, they buy when people sell,
and sell when people buy, to keep the cogs
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turning.
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They donât buy because a stock goes up,
they buy when people sell.
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This involvement of market traders, according
to Investopedia, means traders and investors
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will make more transactions, and thatâs
good for the market in general.
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But how do they make cash taking such risks?
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Well, they charge a little extra when they
sell the stock they bought.
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This is known as a Bid-Ask Spread.
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Thatâs a basic explanation, bc we canât
spend too much time on how the stock exchange
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works.
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What we do need to get into is how Mr. Madoff
made his billions.
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As we said, he was very well known for his
good returns to his clients whose assets he
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managed.
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Apparently, that client list included such
names as Steven Spielberg and Kevin Bacon.
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You see, Madoff was seen as a stand-up guy
in the financial world.
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He even helped form the National Association
of Securities Dealers Automated Quotations
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(aka NASDAQ) and was chairman of that organization
for three terms.
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He made donations to humanitarian causes,
he gave money to politicians, and his brother,
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Peter, served two terms on the board of directors
of the Securities Industry and Financial Markets
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Association.
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So, you might be thinking now, how on Earth
could this guy also be involved in a massive
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scam?
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Madoff was first investigated in 1992, but
it wasnât until the 2000s that subsequent
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investigations by private firms found what
they called âinconsistenciesâ that looked
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like fraud.
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Investigators for years had been saying that
the gains Madoff claimed to be making just
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didnât look possible.
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In fact, for years, financial analyst Harry
Markopolos had been telling people something
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just didnât add up, and embarrassingly for
the them, the Securities and Exchange Commission
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ignored him, even when he went back numerous
times with more evidence of what looked like
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a scam.
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He wasnât the only person that didnât
trust the numbers, however, and many people
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refused to do business with Madoff.
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But how did Madoff get hold of peopleâs
money?
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What he had is called a Ponzi Scheme, which
simply put, is a scheme that offers huge returns
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on investments.
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It was named after Charles Ponzi, who said
that if you gave him some money, heâd give
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you back 50 percent more in just 90 days.
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Sounds great, but what happens is that you
pay off these first few people, and word gets
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around that indeed there is a huge return,
and soon many people want to get in on the
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act.
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You keep taking new money, and pay off older
investors with that cash while expanding.
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The problem is, you arenât actually making
any money.
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Obviously, if all the big investors demand
their cash, youâd be in trouble, but what
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you do is convince them to keep their money
invested as the return will later be even
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bigger.
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Itâs said that Madoff, with his closest
staff, manipulated trade reports with a computer
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program, while they also created bogus stocks
that seemed to give high returns.
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On paper, to the undiscerning eye, it looked
like he was making money.
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The poop hit the fan for Bernie when his clients
wanted back, in total, $7 billion, and he
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said all he had of their money was between
$200 and $300 million.
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This market maker with a good reputation who
had sat on the board of NASDAQ had all this
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time just been enticing people into a scam.
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Itâs thought he had thousands of investors,
and in total they lost about $65 billion.
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Itâs also said Madoff himself made around
$20 billion, or thereabouts.
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Apparently when he was confronted by his sons,
Andrew and Mark, he admitted to them that
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he had been running a Ponzi Scheme.
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He said that everything was âjust one big
lieâ.
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The sons knew nothing about the scam, although
Madoffâs brother Peter was involved.
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This wasnât easy for the sons, and they
both died soon after, with Mark taking his
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own life and Andrew dying of lymphoma.
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Whatâs amazing is how candid and cold Madoff
was after he got caught, once stating, âI
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certainly wouldnât invest in the stock market.
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I never believed in it.â
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He also once admitted that he was surprised
that he had gotten away with it for so long.
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Madoff called the investigators useless, saying,
âI was astonished.
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They never even looked at my stock records.â
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Many of those who lost money wonât get much,
or anything, back, but in 2017 the U.S. government
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promised 24,000 victims that a total of $772.5
million was to be shared among them.
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Madoff was arrested and charged with securities
fraud on December 11, 2008.
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His bail was set at $10 million, and he had
enough cash to pay for that.
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He was kept under house arrest for a few months
until a judge revoked the bail, stating that
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Madoff was a flight risk.
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He was sentenced to 150 years in jail in 2009
at the age of 71.
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If he behaves well, heâll get out on November
14, 2139, at the age of 201.
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Thatâs not going to happen of course, and
it seems the trickster may have got his comeuppance.
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He was sick on many occasions in jail due
to stress, and was also attacked by inmates.
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Others say that the attack was for some reason
made up, and it is far from the truth.
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This might just be the case, seeing that in
a letter to his daughter-in-law, Madoff said,
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âThey call me either Uncle Bernie or Mr.
Madoff.
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I can't walk anywhere without someone shouting
their greetings and encouragement, to keep
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my spirit up.
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It's really quite sweet, how concerned everyone
is about my well-being, including the staff.â
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Whatâs quite amusing are reports by reputable
media that while in prison Madoff had used
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his talents to exploit certain markets.
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âAt one point, he cornered the hot chocolate
market,â said one man whoâd been writing
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an audio series about Madoff.
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He added, âHe bought up every package of
Swiss Miss from the commissary, and sold it
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for a profit in the prison yard.
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He made it so that, if you wanted any, you
had to go through Bernie.â
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So, there it is, the abridged story of one
of the worldâs biggest con artists, the
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dark prince of Ponzi, the real wolf of Wall
Street, and it seems now a shrewd prison peddler
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of Swiss Miss, in his retirement.
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And while we can all agree that what he did
was horrible, we can also all agree that if
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Create an awesome website today and support
The Infographics Show at the same time, by
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going to wix.com/go/infographics or clicking
the link in the description.
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What are your thoughts about the Madoff Heist?
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Is he any more unethical than an ordinary
house burglar, a bunch of old British men
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who committed a jewel heist, a common street
thief that runs off with your iPhone?
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Let us know your thoughts in the comments!
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Also, be sure to check out our other video
called What Happened to Malaysia Airlines
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flight 370?!
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Thanks for watching, and, as always, donât
forget to like, share, and subscribe.
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See you next time!
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