‘He’s a financial serial killer’: how Bernie Madoff became the monster of Wall Street

Locked inside his office on the 22nd floor of a New York building, René-Thierry Magon de la Villehuchet sliced his arms open and bled into a trash can to avoid making a mess for the cleaning lady.

“He chose the methodology of death that he did, a painful solution to atone for his sins of omission,” says Frank Casey, a financial investor who worked with Villehuchet. “What a waste of a man.”

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The French investment fund manager had lost $1.5bn of his clients’ money to Bernie Madoff, the architect of the biggest Ponzi scheme in American history, who had surrendered to police 11 days earlier.

The story of Madoff’s rise and fall, and how his illusory gift for defying the gravity of financial markets shattered countless lives, is told in a four-part documentary released on Netflix on 4 January.

Madoff: The Monster of Wall Street features whistleblowers, employees, investigators and victims as well as previously unseen video depositions of Madoff himself. One interviewee describes him as “a financial sociopath, a serial financial killer”. Another says he was a man of “pure evil” whose tale will still be told a hundred years from now.

But the film also makes the argument that it is facile to suppose that the epic $64bn securities swindle, which wiped out life savings and ruined charities, was the brainchild of a single villain. It would not have been possible without partners in crime and financial institutions willing to turn a blind eye.

Speaking via Zoom from his home in New York’s Hudson Valley, the documentary’s director Joe Berlinger says: “Over time the aura of this story, and how the story was originally reported, and how most people think about the story, is one evil genius who was so charming and manipulative he did all this terrible stuff.

“The reality, which is underreported and a cautionary tale for everybody who has any kind of financial assets in the market, is he got away with it because of a whole cadre of literal co-conspirators or people who should have known better.”

The documentary traces how Madoff was born in a middle-class Jewish neighbourhood in Queens, New York, in 1938. Along with his brother, Peter, he saved a few thousand dollars from working as a lifeguard and installing sprinklers, before setting out to conquer Wall Street.

By the 1980s – the era of Gordon Gekko and The Bonfire of the Vanities – the brothers were running a legitimate business buying and selling stock from an office in midtown Manhattan. Madoff made history by launching Nasdaq, the first electronic stock exchange, and advised the Securities and Exchange Commission (SEC) on the system.

Berlinger, 61, a self-confessed stock market “geek” whose past works include Conversations with a Killer, Crime Scene and Brother’s Keeper, observes: “He’s a guy who largely is responsible for computerised trading, which led to these off-exchange dealers all coming together and creating one computer screen, so to speak, which is the origin of the Nasdaq.

“Bernie Madoff is largely responsible for legitimising that market, the electronic exchange, that today Google, Microsoft, Apple are part of. The irony of this is he was a great innovator, and that certainly is why people trusted him. But there were just too many red flags to ignore.”

The SEC failed to spot those red flags. In a separate office, Madoff was secretly robbing Peter to pay Paul, using cash from new investors to pay returns to old ones. An IBM computer churned out monthly statements showing steady double-digit returns, even during market downturns. By the end of 2008, the statements claimed that investor accounts totalled $65bn.

The trades were fictitious: no securities were ever bought or sold. But seen as a respected elder statesmen with a Midas touch, Madoff was able to burn thousands of investors, including Holocaust survivor Elie Wiesel, director Steven Spielberg, actor Kevin Bacon, baseball legend Sandy Koufax and businessman Fred Wilpon, as well as retired prison officers, teachers and dentists. Many were Jewish; many lived in Florida.

Berlinger says: “At the end of the day, he’s a financial serial killer, and the reason I say that is serial killers don’t have empathy. There’s no way you can look a widow in the eye at the Palm Beach country club and assure them that their life savings will be fine, give me your funds, I’ll take care of you, and then do that to people. He’s somebody who lacks empathy; therefore can’t be remorseful.”

All the while, Madoff and his wife were living the high life. They owned a luxury apartment in Manhattan, an $11m estate in Palm Beach, a $4m home on the tip of Long Island and a home in the south of France. They also enjoyed private jets and a yacht. Like another boy from Queens, Donald Trump, Madoff had elbowed his way into the Manhattan elite.

Berlinger adds: “Of course, greed was some element, but I don’t think he was blinded by greed. He’s a poor kid from Queens who longingly looked over the river towards Manhattan, wanted to be a big player, and just loved being the guy, being successful.

“One of the reasons the Ponzi continued and got ramped up on steroids is his legitimate business was starting to fail, and so he used that Ponzi money to shore up his legitimate business, because he wanted to be Mr Wall Street. Ego and a sense of belonging to the big club of rich fellas that run the world. It was less about greed and more about status and position.”

Madoff claimed he acted alone, but the film highlights his “big four” investors, including Jeffry Picower, a Florida philanthropist who made more money from the Ponzi scheme than Madoff himself. Picower was found dead in a swimming pool at his mansion in Palm Beach in 2009. His widow later agreed to return $7.2bn.

Madoff outfoxed regulators. He also weathered economic storms in the 1990s and the September 11 terrorist attacks in New York and Washington. But he was finally undone by the financial crisis of 2008, when banks that had made reckless bets on mortgage-backed securities collapsed and investors scrambled to pull money out of the stock market.

Spooked investors also started making withdrawals from Madoff’s investment fund, but he ran out of money to give them. While his books said his fund was worth $64bn, most of that money did not exist.

Berlinger says: “The scariest thing of all to me in this story is that nobody brought him down. Regulators missed it. People who are very sophisticated investors, who should have known better, who should have known that a conservative option strategy can’t produce those kinds of results, didn’t ask the right questions.

“None of that brought Bernie down. What brought Bernie down was a black swan event – the financial crisis. And I believe if the markets had just gone in their normal cycles, he might still be doing it today.”

Knowing the game was up, Madoff held a meeting with his sons and admitted his business was “all just one big lie”. A lawyer for the family contacted regulators, who alerted federal prosecutors and the FBI. Madoff was arrested in December 2008 and became the focus of public fury over the wider financial meltdown.

He was sentenced to 150 years in prison after pleading guilty in 2009 to fraud and other charges. He died while incarcerated at age 82 in 2021. His ashes remain in a box in a lawyer’s office because the family refused to receive them.

One of Madoff’s sons, Mark, killed himself on the second anniversary of his father’s arrest in 2010. Madoff’s other son, Andrew, died from cancer at 48 (he had got better in 2003 but blamed the stress of his father’s crimes for its return). Madoff’s brother, Peter, was sentenced to 10 years in prison in 2012, despite claims he was in the dark about his brother’s misdeeds. In February last year, Madoff’s sister and her husband were found dead in an apparent murder-suicide.

A trustee was appointed to recover funds and to date has returned about 70% of lost funds to investors. But questions persist over regulation and oversight.

JP Morgan Chase, which served as Madoff’s bank for more than 20 years, came to a $2bn settlement with government agencies over its relationship with him. Berlinger remains sceptical: “JP Morgan Chase: here’s a checking account with billions of dollars going through. If this was an account with a Mexican name on it, they would assume it’s drug cartel money and every $10,000 transaction would be analysed and there would be suspicious activity reports. It’s Bernie Madoff? We’re not going to worry about it.

“I don’t think JP Morgan knew there was a Ponzi scheme going on, but I certainly think they knew something was not right and they just chose to ignore. Everyone chooses to ignore. That wider culpability to me is a story that nobody’s really pulled together to provide this picture of the immense collapse of any kind of oversight and regulation that should have happened.”

Senior SEC officials were grilled by Congress, with members of both parties asserting that Madoff’s fraud exposed systemic problems. The SEC made rule changes, including in how the agency carries out inspections of investment advisers and brokerage firms.

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However, Berlinger draws parallels with cryptocurrency entrepreneur Sam Bankman-Fried, 30, awaiting trial on charges that he swindled investors and looted customer deposits on his FTX trading platform. “I feel people should take more responsibility for their personal finance, understand where their money is and understand that this can happen again. And guess what? It just did with FTX and Sam Bankman-Fried.

“Not that that’s a Ponzi scheme, but the similarities are striking. You had a charismatic guy who just talked and talked, and people believed without actually looking into the details. You had very sophisticated investors taking other people’s money and giving it to FTX, where FTX then used it to shore up its failing hedge fund. Those people who are taking innocent people’s money and giving it to somebody to invest should have known better.

“Just like with Madoff, the regulatory oversight was nonexistent, in part because that’s a fundamental problem with crypto that has to be fixed. There was more oversight in place to deal with Bernie than oversight in place to deal with crypto so it’s not an apples to apples comparison but in some ways it is. Regulators should have known better and innocent people suffered.”

• Madoff: The Monster of Wall Street is now available on Netflix