The disgraced financier, now serving a 150-year prison sentence in North Carolina, spoke about the origins of his business during a telephone interview with New York magazine.
Madoff suggested he started out on Wall Street legally, producing consistent returns through much of the 1980s due to his instinctive understanding of market movements.
"I always had a good feel for the direction of the market because of the order flow I was seeing," he told reporter Steve Fishman.
However, Madoff ran into trouble in the early 1990s when a drop in market volatility rendered his strategy ineffective, leaving him with too much of clients' money and not enough to invest in.
"The market went to sleep," the 72-year-old said.
He claimed that was when the fraudulent activity began in earnest, as he began to borrow from investors' capital to continue paying out returns.
Madoff's Ponzi scheme left investors out of pocket by roughly $65 billion when it finally collapsed in 2008.
By Tony Aynsley