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Inside Madoff’s Empire: Former Employee Speaks Out

Andrew Cohen was a profitable trader at Bernard Madoff’s firm throughout the 1990s. Shortly before Cohen left the firm—and the financial sector altogether—he was given the opportunity to invest with Madoff.

“I started to hear about people getting really good returns, so I was interested in making good returns,” he said. “It was almost a reward to be able to be allowed to invest with him.”

Now, like many others, Cohen says he lost nearly his entire net worth in Madoff’s alleged Ponzi scheme.

“One moment I was enjoying a very happy life, teaching a fitness class and a yoga class over at the gym, and suddenly I get a phone call from some friends of mine, and in one minute I find out my whole net worth is just about gone." See the accompanying video for the interview.

The Madoff Strategy

Cohen said Madoff’s strategy seemed simple, and it didn't raise any red flags for him at the time.

“He would buy stocks, reap the dividends from them, hedge it by buying puts and selling calls, and I guess he would make some small returns,” he said.

Cohen said if he had know how big Madoff’s accounts were, he would have grown suspicious.

“I don’t know how the SEC missed this, because if you think about the trades he did, it’s one thing if you have a small amount of money under assets and you have some arbitrage opportunity, then you can kind of be nimble and get in when stock prices are possibly lower compared to where the fair value is based on the options hedging strategy, you can kind of get in quickly," he said.

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"With billions of dollars it would be totally impossible to do these trades, because if you’re trying to get in to buy the stocks, your trades are going to force the price of these stocks up so hard that there’s no possible way."

Recovering Losses

Cohen would not reveal how much money he lost in Madoff's scheme, but now he's hoping to recover some of his losses.

“I hear the SIPC is going to throw out a $500,000 lifeline, which I’m hoping to be able to access," he said.

“The working for me was a means to have the freedom to do what I want, not to make a lot of money," he added, "but obviously now my life is totally changed in a financial sense, and I have to figure out what I can do to keep a good quality of life.”