Madoff: are we still feeling the fallout?
December 11, 2008 started like any other day for the majority of the financial world, but while markets opened and economists busied themselves with the 24 hours ahead, one of the most catastrophic instances of financial fraud was about to be revealed to the world. The evening before, Bernard ‘Bernie’ Madoff had made a teary confession to his wife and sons that there would be no Christmas bonuses that year, and that his business, up until that point, had been a sham; little more than a giant Ponzi scheme that had stolen everything that trusting clients and organizations had invested into it. Bernard L. Madoff Investment Securities had nothing left. The following day, Madoff’s sons Mark and Andrew reported their father’s business and its unscrupulous activities to the authorities, and nothing was ever the same again.
The financial impact of the Madoff scandal
In the wake of the financial crisis, this revelation of fraud, which would later amount to over $65 billion, was shattering, both for the banks and the individuals who had now lost everything. Despite taking place over seven years ago, the fallout of this Ponzi scheme is still being felt today. What makes the effects of the Madoff scandal so far-reaching? Surely, as a criminal act carried out on the other side of the world, it had very little fallout concerning the UK? The truth is that the financial sector never truly recovered from the deception, and the Madoff scandal has forever changed the ways in which it operates. Regardless of the country, the impact of the Madoff scandal can be felt, even today.
The public’s perception of those that they had, up until then, entrusted with their life savings, has changed irreversibly, while the name Madoff has become synonymous with distrust and scandalous deeds. As financial advisors and organizations queried their brokers, one positive outcome was delivered to the world. Reacting in a way that would change the financial industry forever, the Securities and Exchange Commission introduced the Wall Street Reform, or Dodd-Frank Act, which gives auditors the right to request quarterly reports from financiers. The investment industry was also ordered to operate with more transparency, leading to many querying why it had been treated with leniency for so long.
The personal impacts of the Madoff scandal
If the effects of the Madoff scandal were shocking to the financial sector, they were utterly indescribable for his victims. While many famous faces lost their money, so too did thousands of regular families. Their savings gone, many are left without a penny, to comprehend a new, devastating way of life, even now. Clawback lawsuits have managed to reclaim some $9billion dollars, but this just isn’t enough for those who had big plans for their money.
Also affected by the Madoff scandal was Bernie’s family. His sons, Mark and Andrew, never managed to shake claims that they too had been involved in their father’s actions, despite being the ones to report the scheme to authorities. Mark later committed suicide, while Andrew died from cancer – a disease he maintained was exacerbated by the scandal – in 2014.
Even with his sons’ deaths, Bernie Madoff’s actions have had implications for those who knew him best. Catherine Hooper, who was betrothed to Andrew at the time of his death, has become the subject of anger among Madoff’s victims after inheriting some $16 million; money that they claim is rightfully theirs. An investor in the firm Urban Angler, a former cover girl for Fly & Fish Magazine, and the founder of Black Umbrella, Catherine has been reinventing herself as an entrepreneur since the scandal. Black Umbrella teaches clients about the intricacies of natural disasters and identity theft, and how best to counter them. It is perhaps apt that her business now arms its clients against the fallout of events such as the Madoff scandal.
Seemingly a million miles away from the hurt and devastation caused by the Madoff scandal, the UK is perhaps a little closer to the fallout than we’d all like to admit. The financial sector has altered its policies to protect brokers and their clients from such a recurrence, while the public may never trust the industry fully again. It only remains to be seen whether a further seven years will be enough to heal the wounds.