That was nearly a half-century ago. Today, investors with Madoff's firm are drowning after the former Nasdaq chairman admitted fleecing his customers of $50 billion.
Madoff, 70, was known as a quirky figure inside his company offices at Manhattan's Lipstick Building. Still, he was respected for his uncanny - and apparently illegal - ability to generate cash for his clients.
The Hennessee Group, which tracks investment performance, says Madoff's firm suffered just five down months in 13 years between 1993-2007.
"He was God to people," said Charles Gradante, one of Hennessee's co-founders.
The self-made Wall Street heavyweight recruited many of his clients at New York and Florida country clubs, including the Palm Beach Country Club.
The school announced Friday Madoff had cut all ties with Yeshiva, resigning as a member of its board of trustees.
While other brokerage firms were bought out by larger operations, Madoff Investment Securities LLC remained a family business - right to the end.
His sons, Andrew and Mark, turned Madoff in Wednesday night after the father confessed his economic sins, said Martin Flumbenbaum, the brothers' lawyer.
Madoff Securities LLC was investigated at least eight times in 16 years by the SEC or other regulatory authorities. In 1992, the SEC investigated one of Madoff's feeder funds, Avellino & Bienes (principals Frank Avellino and Michael Bienes and his wife Dianne Bienes), which invested solely with Madoff. Represented by Ira Lee Sorkin, Madoff's present attorney, Avellino & Bienes were accused of selling unregistered securities, and in its report the SEC mentioned the fund's "curiously steady" promised yearly returns to investors of 13.5% to 20%. However, the SEC did not look any more deeply into the matter. Through Mr. Sorkin, the lawyer who once oversaw the regulator’s New York office, the men agreed to return the money to investors, shut down their firm, undergo an audit and pay a fine of $350,000. Avellino then complained to the presiding Federal Judge, John E. Sprizzo, that Price Waterhouse fees were excessive. In April, 1993, the Judge ordered him to pay the bill of $428,679 in full. However, by the end of January, 1993, Mr. Sorkin and Mr. Avellino managed to curtail the audit, even though the judge concluded that Mr. Avellino had not been a credible witness in the case. Both the securities investigation and the Price Waterhouse audit were effectively over.  At the time, Madoff said that he didn't realize the feeder fund was operating illegally and that his own investment returns tracked the previous 10 years of the S&P 500. Avellino & Bienes, previously an accounting firm, had turned to full-time investments in 1984 in a partnership with Madoff. At the time of the investigation, the SEC did not publicly name Madoff because he was not accused of wrongdoing. Michael Bienes later became a philanthropist donating at least $30 million in Florida and the United Kingdom, with a news report explaining that he "got lucky on the New York Stock Exchange." The 1992 incident was the first public indication that Madoff was placing orders for other funds.
The SEC looked into Madoff in 1999 and 2000 about concerns that the firm was hiding its customers' orders from other traders, for which Madoff then took corrective measures. In 2001, an SEC official met with financial investigator Harry Markopolos at the SEC's Boston office to go over Markopolos's allegations that Madoff's firm was engaged in fraudulent practices. The SEC also said it conducted two inquiries of Madoff in the last several years and did not find major problems. In 2004, after published articles appeared accusing the firm of front running, the SEC's Washington branch cleared Madoff of that accusation. An SEC statement detailed that inspectors examined Madoff's brokerage operation in 2005 after sending the 2004 inquiry to the New York office, finding three violations: the strategy he used for customer accounts, the requirement of brokers to obtain the best possible price for customer orders, and violating SEC rules by operating as an unregistered investment adviser. "The staff found no evidence of fraud," according to the SEC case memo. Mr. Madoff agreed to register his business that September, and the SEC didn't make its findings public.  In 2007, SEC enforcement staff completed an investigation into whether Madoff was running a Ponzi scheme and did not find any fraud or refer the matter to the SEC commissioners for legal action.
The SEC has been accused of missing numerous red flags and ignoring tips on Madoff's alleged fraud. As a result, the SEC's chairman Christopher Cox stated that an investigation will delve into "all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm." A former SEC compliance officer, Eric Swanson, married Madoff's niece Shana, a Madoff firm compliance attorney.