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The three reasons Bernie Madoff was able to pull off the biggest Ponzi scheme in history - and how you can avoid falling victim to the next one
He is America's most notorious financial fraudster, who managed to scam tens of thousands of investors out of approximately $68 billion.
But just how did Bernie Madoff manage to pull off the biggest Ponzi scheme in history? It was a giant con that ensnared celebrities and regular people alike.
Longtime financial investigative journalist Richard Behar grapples with this question in his new book 'Madoff: The Final Word', which offers extraordinary access into the mind and motives of the financial world's most famous conman.
Over the course of a decade and a half, Behar exchanged emails with Madoff, spoke to him on the phone and even paid multiple visits to the North Carolina prison where he was serving his 150-year prison term.
To help others avoid falling victim, the author explained to DailyMail.com the three main reasons he believes Madoff got away with his scheme. He also outlined the warning signs to look out for to avoid falling victim to fraud.
In his new book 'Madoff: The Final Word', Richard Behar asks how Bernie Madoff was able to pull off the biggest Ponzi scheme in history
Longtime financial investigative journalist Richard Behar offers extraordinary access into the mind and motives of the financial world's most famous conman in his first book 'Madoff: The Final Word'
1. Affinity fraud
Ponzi schemes typically begin as affinity frauds, said Behar, in which the con artist will target a particular group - whether that be an ethnic or religious group, or people of a certain age.
Charles Ponzi, the inventor of the scam which bears his name, targeted his fellow Italian-Americans in the 1920s, who trusted him in large part because they shared the same heritage.
A Ponzi, or pyramid scheme, works by paying off early investors with proceeds from later investors. It typically collapses when no new investors can be attracted. In Madoff's case, this happened as the market took a steep downturn in 2008.
'I'm Jewish, and I've spoken with rabbis and others about this, and I'm confident in saying that Jews are especially vulnerable to being conned by fellow Jews due to centuries of persecution and poverty,' said Behar.
One of Madoff's first 'feeders' in the early 1960s, he explained, was a wealthy investor who was looked upon as a success story by fellow Jewish people who had escaped Europe before or during the Holocaust.
'He told them that if they needed extra money, he'd show them how to do it. These people were tailors or bakers, or whatever, and that extra money from Madoff was a lifesaver to them,' he said.
Madoff also cast his net over Jewish Hollywood celebrities and media personalities, including Steven Spielberg, Larry King and Mort Zuckerman, which then attracted money from other famous figures and their money managers.
In order to expand - as Ponzis must do to survive - his scheme morphed from an affinity crime into a global racket dominated by huge feeder funds and banks, Behar said.
Madoff also cast his net over Jewish Hollywood celebrities and media personalities, including Steven Spielberg (pictured), Larry King and Mort Zuckerman, Behar said
Charles Ponzi, the inventor of the scam which bears his name, targeted his fellow Italian-Americans in the 1920s
2. 'No soup for you!'
Similar to Seinfeld's famous 'Soup Nazi' character, Madoff created a universe in which investors were afraid to ask too many questions, said Behar.
The character in the long-running sitcom refuses to serve his famously delicious soup to any disobedient customers, quipping: 'No soup for you!'
Madoff's clients were afraid that if they kept poking him for more information he might toss them off the gravy train and close their account.
'Like nightclub patrons behind velvet ropes hoping to get picked, Bernie was selective and sometimes even told folks who wanted to invest that his fund was closed for the time being and he wasn't taking in new money,' Behar added.
'And that only heightened the allure and the desire to get into this special club. Bernie spoke to me in prison about how people begged to come in.'
Similar to Seinfeld's famous 'Soup Nazi' character (pictured), Madoff created a universe in which investors were afraid to ask too many questions, said Behar
Over the course of a decade and a half, Behar exchanged emails with Madoff, spoke to him on the phone and even paid multiple visits to the North Carolina prison where he was serving his 150-year prison term for 'The Final Word'
3. Due diligence? Nah!
Investors climbed aboard with little more than blind faith, according to Behar.
'Bernie counted on that. People spend more time researching a new TV purchase than they do a Ponzi's can't-lose proposition like Madoff's.'
He added: 'And who among us with a brokerage or IRA account - be honest - has bothered to take thirty seconds to type their broker or investment manager's name into the search bar of Wall Street's database of "disciplinary actions" at the Financial Industry Regulatory Authority?'
Behar said that when he began the reporting for the book, he did a search and found out that his 83-year-old Merrill Lynch broker, who has since died, committed a felony in 1968.
As a general rule, professional investors were excluded by Madoff.
'After all, they could have analyzed the statements and concluded that the consistently high returns were impossible,' Behar said.
Other celebrities including actor John Malkovich and actress Zsa Zsa Gabor lost millions investing with Madoff
Among the individuals who invested with Madoff was New Yorker Sharon Lissauer who lost everything when she handed over her inheritance from her mother. She is pictured leaving court the day Madoff was jailed
So what is Behar's advice to avoid falling victim to fraud?
Madoff did not allow his customers to view their account statements online, nor did he allow them to email his employees.
'Put simply, if you're not allowed to see statements online, run for the hills! If you're not allowed to email your broker, run!
'If the printed statements mailed to you look like something chugged out from a 1960s-70s computer (and they did), run!'
And pay attention to the disclaimer.
'Believe it or not, I also stated that there was always the possibility of fraud being committed by me or others,' Madoff told Behar.