I have read dozens of articles about what Madoff did, about those who were affected (including those killing themselves) and about the small fry who got hurt. I have also read about SEC investigations and the like. What I haven't read about yet is why he did it.
In the spirit of full disclosure, I too am an investor and I have lost money, but thankfully, have made far more than I have lost. In the few cases where personal friends and such were involved in a loss, I have made full restitution from my own funds and/or I am still trying to do this even though I have no such obligation to do so. Why do I do this? Because I have a conscience.
The definition of psychopath (sociopath) is amorality...ergo, no conscience is possessed by the perpetrator. Back in 2003 the NY Times and the BBC ran articles about psychological studies that demonstrated this phenomenon--the corporate psychopath; you can Google these articles if you are interested.
Now I have to be clear, I (gratefully) wouldn't know Madoff from a hole in the wall. And I have enormous sympathy for all who lost money with him. But the large institutions with the wherewithal to conduct due diligence and the ability to survive the losses were merely playing the tables at Las Vegas. My heart really pours out to those small fry who have lost entire life savings and are now, at advanced ages, forced to try to compensate. The chances are that they will never recover. AND WE HAVE PEOPLE KILLING THEMSELVES OVER THIS THING!
Why did Madoff do it? This interests me greatly from a personal and academic standpoint. After all, if you steal a million and get away with it, then why continue? Or $100 million? But at $50 billion and counting, there has to be a better explanation than pure greed. My supposition (not yet covered in the press) is that Madoff is a corporate psychopath (sociopath) who went on a lengthy financial killing spree at the outset. After he risked exposure, he (as my students have heard so often) then settled into habituation, which is to say that he did it again because he was able to do it before.
But he acted not alone. There must have been hundreds of "investment advisers" who attempted to steer the poorer small folks towards Madoff, and while it may be comforting to think that they were just trying to help their clients out, you better believe me, they got quid pro quo for this activity. The evident disclosure lapses by all involved compounds the matter.
So is Madoff a scumbag? The answer is unequivocally yes, and he is a sicko scumbag to boot. But let's not forget his aiders and abettors who used "apparent scarcity" to entrap their victims.
The truism is that if it looks too good to be true than it is. That applies here in spades. For those who would like to understand that the world works in oscillations and not smooth curves, I would recommend reading "Fooled by Randomness" and "The Black Swan," both authored by Nassim Nicholas Taleb.