What Netflix's ‘Madoff: The Monster of Wall Street’ taught me about money

Everyone believes that their money is safe, tucked away in scandal-proof risk-free accounts that banks assured them were safe. No, I’m not saying it’s best to stuff money in one's pillows to keep it safe, just reminding you of the potholes on the road to financial freedom.

So why is Netflix warning us again about Bernie Madoff? Haven’t we already seen Robert De Niro starring in and as the heartless trader of Wall Street in the goosebump-inducing movie Wizard Of Lies? Well, it’s on Disney+Hotstar if you want to see it.

For more than 20 years, Bernie Madoff ran the biggest Ponzi scheme in history and left a trail of suffering of impoverished investors who trusted him with their life savings. It has taken the government years to clean up after him and small investors lost more than just money. They lost hopes and dreams of retiring on the returns that were promised.

Aah, the retirement plans! How many times have you dreamed of living the quiet life, and then life intrudes to make a dent in your plans. Those who fell for Bernie’s Ponzi scheme also had plans…

Technically the term Ponzi scheme belongs to Charles Ponzi, a sweet talking man who promised people that their money would make more money if only they handed it over to them. Bernie Madoff did the same, but on such a huge scale that no one could guess that the money he collected from his investors was simply going into his account.

The first red flag: Just because they’re well dressed and well spoken and say that your favourite uncle Charlie has invested with them is no reason to hand over all your savings to them.

Bernie Madoff’s father-in-law did not trust him, but his daughter did, and after a couple of hiccups – where he had to give a loan of $5000 to bail out the son-in-law – Bernie Madoff’s trading business took off. Bernie’s brother Peter helped Bernie design one of the first computer based trading systems. Everyone began to trust that system where you could see your trade reflect in your account instead of depending on paper chits.

Here’s your second red flag. Don’t let anyone tell you that they have a fantastic system where you can see how wonderfully your money is doing, but you cannot touch the money… Bernie’s trading business was doing beautifully. But the need to prove that he was not a failure like his dad propelled him into starting a scheme that grew so big, he had no way to stop the avalanche.

Multiple flag alerts here! Even when you visit their office that seems spotless, superbly appointed with computer terminals beeping away merrily and the people all dressed well, don’t be gobsmacked by the flash and the polish. Ask questions, do your research. Just because Steven Spielberg invested with Bernie Madoff and the Yeshiva University trusted him as did NASDAQ (he was on the board of trustees even!), no reason to trust the version of Bernie sitting in front of you assuring you that he has your best interests in mind.

We tend to believe that bad things happen only to others. But as granny used to say, ‘A dollop of caution doesn’t hurt’, we should be cautious when we invest our money in schemes that promise returns higher than everyone else is offering.

Bernie Madoff offered returns whose growth graph was rising at a steady 45 degrees! That looks too good to be true, isn’t it? It was! The numbers did not add up!

A portfolio manager named Frank Casey at another firm Rampart Investment Management who was being constantly asked ‘why aren’t we performing as well as Bernie?’ decided to investigate. He asked financial fraud investigator Harry Markopolos to check on the numbers. And the secrets were so gigantic, even the authorities could not fathom the depth of the revelations. Instead of investigating, the authorities actually asked Bernie, ‘Did you fake the numbers?’

Here’s your red flag. Sometimes the authorities are incapable of sussing out details, the little guy out of nowhere manages to examine and reveal! So read everything about schemes before you dip into your savings.

It’s only human to cheer for someone who beats the system constantly. After all, we have all grown up hearing stories about underdogs. Underdog movies show us how they overcome their circumstances and bring glory not just for themselves but for everyone who was kind to them. In the show Madoff, we see how he recruited untrained people who were willing to work and earned their loyalty for life. Bernie Madoff’s right hand man Frank DiPascali Jr. was picked to help Bernie run the Ponzi scheme. The man was a whiz at creating fake trades and receipts. If you asked Bernie to show you how your money was doing, Frank DiPascali’s fake system made you believe all was okay.

Trouble with this situation is that it can be felt in real life as well. This should not only raise and wave red flags immediately, but there should be alarms going off in your head. When you doubt certain things that someone is asking you to do, and you hesitate in putting your signature on those documents, people will make you feel so guilty that you will overcompensate by - let’s say - investing more than you intended. Bernie Madoff was counting on this guilt. When people demanded he show them the records, he made them feel so guilty that they continued sending him money to invest…

And yes, the final red flag should begin to wave when you hear people telling you that they don’t really need your little savings. That they deal exclusively with the rich, and your life savings are a mere pittance when compared with the high stake rollers they deal with every day. They might even be meeting you at their ‘club’ which intimidates you a little and when you’re thrown off by the glamour, they condescend to take your money. Bernie did that to European royalty who gushed at being accepted. And they lost their money. Let us not fall into that trap.

Movies about Wall Street will tell you, ‘Greed is good!’, but we’re smarter than that. We prefer Shakespeare who advised us to trust no one…

Manisha Lakhe is a poet, film critic, traveller, founder of Caferati — an online writer’s forum, hosts Mumbai’s oldest open mic, and teaches advertising, films and communication. She can be reached on Twitter at @manishalakhe.