Bernard Madoff has claimed his Ponzi scheme, which left investors short of $65bn when it collapsed in 2008, started off as a legitimate business that earned 15 per cent annual returns through much of the 1980s.
“I always had a good feel for the direction of the market because of the order flow I was seeing (in his market-making brokerage business),” he said in a series of taped phone calls with a reporter for New York magazine.
The jailed broker said that he started defrauding investors in the early 1990s when a period of low market volatility made it hard for his strategy to work. “I allowed myself to be talked into something, and that’s my fault. I thought I could extricate myself after a short period of time. But I just couldn’t,” he said.
Mr Madoff’s claims directly contradict the evidence uncovered by the trustee charged with recovering money for the victims of the scheme. Irving Picard and his team of lawyers have said they found no evidence of legitimate trading by the investment business dating back to the 1970s.
In what the magazine described as several hours of collect phone calls from a federal prison in North Carolina, Mr Madoff also blamed institutional clients for failing to ask the right questions and regulators for failing to spot the fraud.
“These banks and these funds had to know there were problems,” Mr Madoff said, noting that he refused to answer many of their basic questions or show his trading records. “I wouldn’t give them any facts, like how much volume I was doing. I was not willing to have them come up and do the due diligence that they wanted. I absolutely refused to do it. I said, ‘You don’t like it, take your money out,’ which of course they never did.”
Nor was he any more sympathetic to individual investors.
“Look, none of my clients, even if they lost every penny they put in there, can plead poverty,” he said. “Look, it doesn’t mean I’m excusing what I did, it doesn’t mean I don’t feel sorry for them. I’m embarrassed . . . It was the people that came in very late in the game that got hurt. All of my friends, most of my individual clients, are not net losers.”
Mr Picard has calculated that Mr Madoff’s investors lost about $19.6bn – the rest of the missing money includes false profits that his clients believed they had. The trustee has filed hundreds of lawsuits seeking money from clients who got back more than they put it in and from banks and hedge funds that the trustee claims enabled the fraud. So far, the trustee and US prosecutors have recovered more than $8bn.
In parts of the prison conversation, Mr Madoff appeared to wallow in self-pity, telling the magazine that he was in therapy and his wife Ruth stopped speaking to him after their son Mark committed suicide in December. He revealed that he asked his therapist whether he was a sociopath and was reassured by the answer.
“She said, ‘You’re absolutely not a sociopath. You have morals. You have remorse’ . . . I am a good person,” he said.
Mr Madoff insisted, as he did when he pleaded guilty in 2009, that his family was not involved in the scheme, in spite of several of them working for the Madoff market-making business.
“It was a nightmare for me,” he said. “Look, imagine going home every night not being able to tell your wife, living with this axe over your head, not telling your sons, my brother, seeing them every day in the business and not being able to confide in them.”