Bernard “Bernie” Madoff, convicted architect of an infamous and epic securities Ponzi scheme with thousands of investors, died behind bars on April 14 at the age of 82. Noah Stoffman, an associate professor of finance and Weimer Faculty Fellow at the Indiana Kelley School of Business, has researched the effect of such fraud beyond the direct investments that were lost by victims.

His 2018 paper, “Trust Busting: The Effect of Fraud on Investor Behavior,” co-authored with professors at Cornell University and the University of Texas-Dallas, showed that the collapse of the Madoff Ponzi scheme had an effect not only on his many direct victims, but also on the general level of trust in financial services. 

“People who live in the same areas as victims of the fraud withdrew assets from investment advisers and increased their deposits in banks. Financial advisers in these areas were also more likely to close. Our analysis shows that advisers who provided services that can build trust—such as financial planning advice—saw lower levels of withdrawals. Our evidence suggests that this decline in trust shock was transmitted through social networks,” Stoffman said. 

Stoffman’s research focuses on the investment decisions of professional money managers and individual investors, and on the effect of technological innovation on asset prices. Much of his work highlights the importance of social interaction in the spread of information in financial markets. Stoffman teaches courses on analysis of financial data to undergraduates, MBAs, and doctoral students at the Kelley School.