That's 1000% not why Madoff ended up in prison. Not even remotely close.

Madoff didn't invest the money. And he didn't even promise ridiculous returns. What he gave was unfathomably reliable returns.

He also operated his business illegally and without oversight.

And, most importantly, because he didn't actually invest the money, and because he elaborately created reports of fake trades that never happened, he used the money of people entering his fund to pay out the returns to other investors (and to keep his other more legit business afloat). The literal definition of both fraud and a Ponzi scheme.

People promising huge returns aren't remotely close to what Madoff did.

spongeboob: Fark_Guy_Rob: That's 1000% not why Madoff ended up in prison. Not even remotely close.

Madoff didn't invest the money. And he didn't even promise ridiculous returns. What he gave was unfathomably reliable returns.

He also operated his business illegally and without oversight.

And, most importantly, because he didn't actually invest the money, and because he elaborately created reports of fake trades that never happened, he used the money of people entering his fund to pay out the returns to other investors (and to keep his other more legit business afloat). The literal definition of both fraud and a Ponzi scheme.

People promising huge returns aren't remotely close to what Madoff did.

So Bernie didn't promise people big pay outs and they were like oh let's give this guy money because ??

'huge' is subjective, so is 'big payouts'. But, essentially, yes.

Madoff's "unusually consistent" annual returns of around 10% were a key factor in perpetuating the fraud.

Dependingon which source you want to use and how you define it, that's about what the stock market returns. Clearly the guy was a liar and could have promised different things at different times, but most people who got scammed weren't looking for quick money or huge returns.

What really got people was the consistency. I mean, in addition to Bernie being a gifted salesman/conman.

In the beginning, he was the son-in-law of a successful accountant. People gave him money because they trusted the Father-in-law who was a legit businessman.

Aside from the ponzi, Bernie had lots of genuine success. He had a successful trading firm, one of the largest participants in the NASDAQ, a thing he largely created. It was the first electronic stock exchange.

He was an industry recognized figure, with decades of rock solid returns. For decades, every person who wanted to pull their money out, got their money. For many many years, it was largely word of mouth too. So someone you already know and trust tells you about it. Tells you they've been using it for years. Shows you returns that, at a glance, aren't unreasonable...but are ridiculously consistent.

That's why people invested with him. Well, individual investors anyway. Later on, he was waiving commissions for institutional investors. And depending on who it was, and when it was, they may or may not have known it was run by Madoff, but the tl;Dr is that he didn't promise insane returns. He demonstrated many years of consistency that shouldn't have been possible.

In his own words:

The returns were really nothing special, given that the Standard & Poor's 500-stock index generated an average annual return of 16.3% between November 1982 and November 1992. 'I would be surprised if anybody thought that matching the S&P over 10 years was anything outstanding,' he says.

But more importantly, general claims about huge returns don't meet the bar for fraud.

"Invest in my new company! It will be the next Google! We could make BILLIONS" is fine to say. And companies project future earnings targets, and fail to hit them all the time.

So whether he did or didn't make big claims is mostly irrelevant. Because that's not why he was arrested.