Because Madoff’s investors were – at least as far as they knew – doing well, there was little need for them to redeem money from the funds. In addition, before the real estate market collapsed and while the job market was still strong, Madoff’s investors had little reason to tap their investment funds. This left Madoff free to spend their money while continuing to issue false reports showing double-digit returns.
Madoff survived SEC investigations and received very little skepticism for continually beating his peers. Ascot even received investments from several prominent people including the Wilpon family, which owns the New York Mets, and actors Kevin Bacon and Kyra Sedgwick, who were then married. In some cases, famous people had their funds invested in Ascot by their own brokers without their knowledge, but through the mid 2000s, Ascot flourished.
The end came abruptly when in late 2008 declining market conditions led to Ascot customers to redeem approximately $7 billion in funds. Madoff, lacking the money to pay his clients, made a number of moves as his fraud crumbled around him. First, he paid nearly $200 million bonuses to top executives and family members, later, he confessed the fraud to his wife and two sons.
Madoff was arrested in December 2008 and plead guilty in March of 2009. He was sentenced to over 100 years in prison.
Madoff’s son Mark, who was never charged in the fraud, killed himself in December 2010. Efforts continue now to recover Ascot assets from investors who cashed out profits from the fund, but investors will only receive a fraction of the capital they invested.
Daniel B. Kline can be reached at email@example.com.