He was sentenced to 41 months in prison, and was made to resign as CEO from Steven Madden, Ltd. In 2002, Madden was convicted of stock manipulation, money laundering, and securities fraud. Because the violations were not criminal in nature, the SEC was seeking to recover $1,637,000 in a combination of illegally avoided losses, interest, and a civil penalty.
In 2001, the SEC filed charges against Madden in Federal Court in New York state, alleging SEC violations. A settlement of $9 million was reached in 2004. In June 2000, a class action lawsuit was filed against Madden for issuing materially false and misleading statements during the Class Period. Madden's financial affairs were closely entangled with Long Island " pump and dump" brokerage house Stratton Oakmont, cofounded by Madden's childhood friend Danny Porush, who first lent him money to expand his fledgling company, and then underwrote its initial public offering.
The youngest of three brothers, he started the company with $1,100 in 1990 by selling shoes out of the trunk of his car. After high school, Madden studied at the University of Miami for two years before returning to Long Island. He grew up in adjoining Lawrence and graduated from the local high school in Nassau County, New York. Madden was born in Far Rockaway, Queens, the son of a Jewish mother and an Irish Catholic father.