Behind the Scenes of the Madoff Scandal with a Trader on the Inside | Andrew Cohen
Apr 16, 2025
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In this engaging conversation, Andrew Cohen, a former Goldman Sachs trader turned finance professor, shares his harrowing experience of working at Madoff’s firm and being caught in the largest Ponzi scheme in history. He discusses the intense trading culture and the advanced technology of the era, as well as his interactions with Madoff's sons. Andrew reflects on the trauma of losing everything and the journey to rebuild his life in academia, offering valuable lessons on risk management and the importance of ethics in finance.
Andrew Cohen's transition from high-stakes trading at Madoff's firm to academia underscores the importance of ethical integrity and transparency in finance.
His experiences with market dynamics and the transformative impact of technology emphasize teaching finance students to adapt to modern trading tools and strategies.
Cohen advocates for prioritizing personal growth and passion over financial compensation in career choices to achieve long-term fulfillment and success.
Deep dives
The Journey from Trading to Teaching
A unique transition is highlighted as a semi-retired Wall Street trader shifts from high-pressure trading at Madoff's firm to a career in education. Initially working on the trading desk at Bernie Madoff's firm, the speaker gained hands-on experience in market making and trading strategies that would eventually shape his career. This experience not only involved technical skills but also taught the importance of risk management and understanding market dynamics. Today, as an educator, he uses real-world scenarios, such as recent economic events, to contextualize lessons about investing and finance, providing students with relevant and practical knowledge.
Lessons Learned from Market Events
The speaker emphasizes how market events, such as inflation scares or economic downturns, become invaluable teaching tools in the classroom. Using real-time data and analysis of past events, students learn to connect theoretical finance concepts with current market realities. For instance, during the COVID-19 pandemic, the abrupt market changes provided critical lessons on the interconnectedness of global events and financial markets. These experiences are tailored to enhance student understanding of economic principles and their implications on investments.
The Impact of Technology in Trading
The discussion also highlights how advancements in technology have significantly transformed trading and investing practices. The speaker recalls his early excitement over technological innovations in trading tools back in the 1990s that streamlined processes and enhanced efficiency. Today, he encourages his students to embrace technology, including AI and platforms like Bloomberg, as essential tools for strategic analysis and decision-making. This fosters a mindset where students can leverage modern tools to enhance their learning and invest wisely in the future.
Navigating Ethical Challenges
A pivotal reflection is made on the ethical dilemmas faced while working under Bernie Madoff, particularly relating to integrity and transparency in finance. Despite recognizing the lucrative nature of Madoff's operations, the speaker grapples with the moral implications of the environment and the later revealed fraudulent practices. His experiences with both Andy and Mark Madoff taught him lasting lessons about workplace dynamics and management styles, emphasizing the importance of maintaining professional ethics regardless of the surrounding culture. This understanding now shapes his approach in academia, where he strives to impart values of integrity and ethics in finance to his students.
The Value of Human Capital Over Financial Gains
The speaker advocates for prioritizing human capital and learning experiences over mere financial compensation in career choices. He advises young professionals to seek roles that allow growth and learning rather than focusing solely on salary, echoing a belief that when individuals engage in work they are passionate about, they ultimately become more successful. Personal anecdotes reveal how pursuing personal interest over higher pay led him to a fulfilling career in education rather than remaining in high-stress trading roles. This wisdom encourages students to be mindful of their passions and long-term career satisfaction rather than short-term financial gains.
In this episode of Excess Returns, Matt Zeigler sits down with Andrew Cohen, who shares his extraordinary journey from Goldman Sachs trader to working directly with Bernie Madoff and ultimately becoming a victim of history's largest Ponzi scheme. Now a respected finance professor, Cohen offers unique insights into Wall Street's trading culture, the shock of Madoff's fraud, and how he rebuilt his life in academia after losing almost everything.
Topics Covered:
Andrew's early career at Goldman Sachs and how basketball gambling on the trading floor taught him market-making skills
The trading operations and technology at Bernard L. Madoff Investment Securities in the early 1990s
Working dynamics with Bernie Madoff's sons, Mark and Andy, and office politics
How Andrew was invited to invest in Madoff's "exclusive" fund
Andrew's decision to leave Wall Street at the height of his success
The devastating moment Andrew learned about Madoff's arrest and the Ponzi scheme
The additional ordeal of facing clawback lawsuits after losing his investment
Transitioning to academia and finding a more fulfilling career path
Lessons for investors and finance students about risk, technology, and communication
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