Losses and profits. Strange coincidence. Wednesday April 14, the very day that the banker with grip Gary Gensler was confirmed by the Senate of the United States as the new president of the SEC, the “gendarme” of the Stock Exchange, died in a cell of the penitentiary of Butner, in North Carolina, the author of the biggest financial scandal of the XXe century. Bernard Madoff has caused his clients to lose tens of billions of dollars, caused serial suicides and ridiculed his country’s stock market regulators. He died at the age of 82, while serving a 150-year prison sentence. “I leave shame as an inheritance to my family and my grandchildren”, he concluded, in June 2009, at the end of his trial. This revealed a system built on two eternal weaknesses of human societies: the blindness of the victims and the complacency of the overseers.
From the 1960s, Bernard Madoff had developed a brokerage company that had become, over the years, one of the most important and dynamic on the New York Stock Exchange. But he had created in parallel an investment company intended to prosper the fortunes of selected clients: movie stars, letters, and even finance. With an irresistible promise: a continuous average return of 15% per year over a very long period. From 1990 to 2008, despite the vagaries of the markets, no negative year clouded the horizon. How? ‘Or’ What ? Well-kept mystery.
No investigation was conducted
Old financiers know that when you are promised both the security of a Treasury bill and the exceptional performance of the stock market, it is because there is something wrong with it. And the eel in this case was a gigantic Ponzi scheme, where new investor money financed the retribution of current clients.
Some, however, have worried about the rise of such a spectacular machine. Three times, between 2001 and 2005, the financier Harry Markopolos alerted the SEC. No investigation was carried out, despite confusing indications. Big banks have turned a blind eye. Everyone was happy, the water was clear, so why stir the mud? It was not until the crisis of 2008 and the request to withdraw funds from customers to realize that they had disappeared. Gary Gensler will take the head of a stock market authority deeply reformed following this disaster. But the legacy of the most famous resident of Butner Penitentiary remains alive today.