Largest white collar crime

The largest white collar crime ever was perpetrated by American financier Bernie Madoff through his investment firm, Bernard L. Madoff Investment Securities (founded 1960). For at least two decades, Madoff took the principal invested by customers of his company's Asset Management division and deposited it in a personal bank account. The return on investment that his customers saw in their statements was entirely fabricated, and the few customers who decided to cash out were paid using loans or money from Madoff's secret account. By the time Madoff was arrested on 11 December 2008, 4,800 investors had paid in a total of $19 billion, and their reported investment account balances added up to $64.8 billion (including the fabricated gains).

The exact date at which Madoff began his fraud – a type of scam known as a Ponzi scheme – is not clear (he claimed it was 1991 in his court testimony, but analysts and former colleagues have suggested he may have started as early as the 1960s). The decades-long con began to fall apart in the wake of the 2008 financial crisis, which led many nervous investors to try to withdraw their account balances. Madoff was faced with requests to withdraw around $7 billion from the supposedly $64.8-billion fund, when in reality he had only around $300 million available to disperse.

Madoff's con was able to keep going for so long because of Madoff's impeccable reputation. He was one of the founders of the NASDAQ exchange, and one of the biggest brokers in the world. The other divisions of his business were legitimate operations with proven, successful investment strategies, which provided cover for the asset management division. He was also helped by the complex and opaque nature of his purported investment strategy, which delivered large, but not totally implausible (at least on the surface) year-on-year returns.

The alarm was first raised about Madoff's investment fund in 1999, when analyst Harry Markopolos ran the numbers and concluded Madoff's reported profits were impossible. Madoff was able to evade discovery for more than a decade, however, thanks to his political influence and missteps by the Securities Exchange Commission.

Madoff was convicted in 2009, and sentenced to 150 years in prison. His yacht and three homes were auctioned off, and his other assets seized. Lawyers representing Madoff's 4,800 defrauded investors have recovered $14.37 billion of their clients' lost principal as of 18 December 2020.