Financial Disaster as a Risk Factor for Posttraumatic Stress Disorder: Internet Survey of Trauma in Victims of the Madoff Ponzi Scheme

The news of the arrest of Bernard Madoff on December 11, 2008, heralded the largest financial Ponzi scandal in global history. As much as $61 billion dollars in assets disappeared along with former investors' lifelong savings and legacies. Most of these victims were socially networked; therefore entire families, communities, and charitable institutions were adversely affected (Arvedlund, 2010; Henriques, 2011). In a literature review of the epidemiology of post-traumatic stress disorder (PTSD) following disaster, Galea, Nandi, and Vlahov (2005) noted that the definition of "disaster" in many studies does not necessarily connote a loss of human life. In their view, disasters could result from "mass traumatic events that involve multiple persons and are frequently accompanied by loss of property and economic hardship on a large scale" (p. 79). For Madoff victims en masse, this sudden and devastating financial event meets criterion A qualifications of a trauma as required for the Diagnostic and Statistic Manual of Mental Disorders (4th ed., text rev.) (DSM--IV-TR) diagnosis of PTSD (American Psychiatric Association [APA], 2000). To date, research has not specifically examined the risk factor for PTSD associated with sudden and dramatic personal financial loss. Since the introduction of the formal diagnosis in 1980, a series of epidemiologic studies using community samples has found that the relatively high incidence of traumatic experiences in the normal civilian population does not necessarily translate to correspondingly high lifetime PTSD prevalence rates (6 percent to 12 percent) (Breslau, Davis, Andreski, Peterson, & Schultz, 1997; Kessler et al., 2005; Kessler, Sonnega, Bromet, Hughs, & Nelson, 1995). LEVELS OF PTSD Several factors are believed to influence the likelihood of developing PTSD following a traumatic event. The nature of the trauma has been closely examined in PTSD occurrence (Breslau, Chilcoat, Kessler, Peterson, & Lucia, 1999). In the simplest of terms, the Madoff trauma could be considered a criminal robbery. It has long been established that higher risk of PTSD is associated with stressors such as sexual assault, robbery, and multiple trauma (Breslau, 2002; Kessler et al., 1995), although assaultive violence may be a strong underlying factor (Breslau et al., 1999). Profdes of victims of criminal events show heightened levels of distress and fear coupled with suspiciousness/ guardedness that are believed to contribute to elevations of PTSD in comparison with victims of industrial accidents (Shercliffe & Colotla, 2009). PTSD can be especially severe or long lasting when the stressor is of human design rather than that of natural disaster (APA, 2000). The criminality involved in the Madoff trauma was exacerbated by feelings of betrayal at the hands of a man several victims knew personally. Many victims who made direct investments were encouraged to do so within the context of their own social networking. Indirect investors were often guided through their financial advisors (Arvedlund, 2010). A majority of the victims of this trauma were Jewish. These qualities are in keeping with the type of financial crime known as affinity fraud. According to the U.S. Securities and Exchange Commision (SEC, 2006), affinity frauds focus on members of identifiable groups, such as religious organizations, ethnic communities, professional groups, and charitable organizations. As in the case of Bernard Madoff, the duplicitous financial advisor is oftentimes a member of the group, which, in turn, inspires greater trust and less scrutiny on the part of the investor. Mass casualty events are also associated with increased rates of PTSD (Pandya, 2009), as is the case with terrorist attacks (Galea et al., 2002; Schlenger et al., 2002) and natural disasters such as hurricanes (Mills, Edmondson, & Park, 2007; Weems et al., 2007) or earthquakes (Priebe et al., 2009). …