The Phantom Economy   /   Summer 2010   /    The Phantom Economy

The Madoff Affair and the Casino Economy

Every man for himself, and the devil take the hindmost.

Robert Jackall

Financier Bernard Madoff in a Manhattan federal court, March 12, 2009; © Illustration by Aggie Kenny/Stringer/Getty Images.

In his allocution accompanying his guilty plea on March 12, 2009, Bernie Madoff describes his several crimes:

Your Honor, for many years up until my arrest on December 11, 2008, I operated a Ponzi scheme through the investment advisory side of my business, Bernard L. Madoff Securities LLC…. As I engaged in my fraud, I knew what I was doing [was] wrong, indeed criminal….

The essence of my scheme was that I represented to clients and prospective clients who wished to open investment advisory and individual trading accounts with me that I would invest their money in shares of common stock, options, and other securities of large well-known corporations, and upon request, would return to them their profits and principal. Those representations were false for many years…. I never invested these funds in the securities, as I had promised. Instead, those funds were deposited in a bank account at Chase Manhattan Bank. When clients wished to receive the profits they believed they had earned with me or to redeem their principal, I used the money in the Chase Manhattan bank account that belonged to them or other clients to pay the requested funds. The victims of my scheme included individuals, charitable organizations, trusts, pension funds, and hedge funds….

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