This Day in History: American businessman and financier Bernie Madoff was born on this day in 1938. Bernie Madoff also ran the largest Ponzi scheme in history, worth about $64.8 billion, for which he was arrested on December 11, 2008. A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.
Ponzi schemes are not new. It got its name in the 1920's after Charles Ponzi, but long before that Charles Dickens wrote about such schemes in his 1844 novel Martin Chuzzlewit and his 1857 novel Little Dorrit. The Mormon Kirtland Safety Society in the 1830's had some of the hallmarks of a Ponzi scheme.
Some of the most notorious participants in this type of crime were women. In the 1860's, Nancy Clem ran such a scheme, as described in the book, "The Notorious Mrs. Clem: Murder and Money in the Gilded Age." In Munich, Germany, Adele Spitzeder founded the "Spitzedersche Privatbank" in 1869, promising an interest rate of 10 percent per month. By the time the scheme collapsed in 1872 it had become the largest case of fraud in 19th-century Bavaria. Sarah Howe opened a savings bank called Ladies' Deposit Company in 1878 meant to target unmarried women. She claimed that the bank worked with a Quaker charity that wanted to help less privileged women. She promised high interest rates of eight percent per month. There was in fact no such charity. Howe was able to gain over 1,200 clients and $500,000 in deposits before she was outed as a fraud in 1880. After Sarah Howe was released from prison she become a fortune teller until her death in 1892.
There were some famous victims of Bernie Madoff's Ponzo scheme, including Kevin Bacon and his wife Kyra Sedgwick, who lost millions. John Malkovich also lost millions, and Larry King lost 700k.
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