No one knows where Madoff’s money went. It would be hard for him to spend $50 billion on himself. He could have secretly sent it to charities round the world. That would make him the greatest "Robin Hood" of all time.
A more simple explanation is that he lost the money trade after trade, year after year. He took in more cash from investors and paid a little out in redemptions. When redemptions got too large, he confessed.
One of the rules on Wall St. is that when someone loses money, someone else makes it. Madoff may not have lost $50 billion. No one knows that exact amount. Some news reports say that experts can account for about $35 billion.
The nice thing about being on the other side of Madoff’s trades is that those who profited will not have to give the money back. Some of the people who took their money out of Madoff’s fund long ago may have to share that cash with the people who stayed and got burned. But, when Madoff made billions of dollars in bad financial bets, and that is one explanation of what happened, some group of institutions on Wall St. benefited. If Madoff had kept his trades in the tens of millions dollars each, he probably would not have aroused any suspicion.
Madoff may have destroyed the value of his funds for those who trusted him. In the meantime, he probably made some other people remarkably rich.
Douglas A. McIntyre