Markopolos, who comes from a family of Greek-Americans, graduated from Cathedral Preparatory School in Erie, Pennsylvania in 1974. He received an undergraduate degree in Business Administration from Loyola College in Maryland in 1981 and an M.S. in finance from Boston College in 1997.

In May 1978 he received a reserve commission as a 2nd Lieutenant, Infantry, in the US Army from Loyola College ROTC. Mr. Markopolos is a graduate of several Army post-graduate schools including Infantry Officer’s Basic and Advanced Courses, the Civil Affairs Officers Advanced Course and US Army Command & General Staff College. Mr. Markopolos has commanded troops at every rank from 2nd Lieutenant to Major during 17 years of part-time reserve component service in the Army National Guard and Army Reserve. He left the Army Reserve in April 1995 to apply for and enter graduate school at Boston College the following September.

He worked at Boston-based Rampart Investment Management Co. from 1991 through 2004, ultimately becoming its chief investment officer, and is a past president of Boston Security Analysts Society Inc. He is a Chartered Financial Analyst (CFA) and a Certified Fraud Examiner (CFE). He now works, with a certain degree of anonymity, as a forensic accounting analyst for attorneys who sue companies under the False Claims Act and other statutes, focusing on tips which lead to continuing investigations into medical billing, Internal Revenue Service, and United States Department of Defense frauds,where a whistleblower would be compensated.

On February 11, 2009, the Boston Security Analysts Society honored him with a silver whistle in recognition of his efforts in calling attention to disgraced money manager Bernard Madoff.

Boston-based Rampart Investment Management Co. is a firm that specializes in the trading of options (contracts that let investors buy or sell stocks and other financial instruments at set prices). In 2000, Markopolos' bosses wanted to learn how they could match Madoff's double-digit returns. Markopolos was assigned to deconstruct Madoff's strategy to see if he could replicate it. Again and again, he could not simulate Madoff's returns, using information he had gathered about Madoff's trades in stocks and options. Markopolos eventually decided Madoff was either running a Ponzi scheme - using money from new clients to pay off old ones - or he was engaging in illegal "front running," improperly trading in investors' private accounts ahead of orders the firm received from outside clients. Even after leaving Rampart, he persevered, driven by the intellectual challenge of cracking a Wall Street legend, and the ongoing encouragement from a Boston SEC staffer, Ed Manion.

The culmination of his analysis was a 21-page memo Markopolos sent in November 2005, to SEC regulators, "The World's Largest Hedge Fund is a Fraud." It outlined his suspicions in more detail and invited officials to check his theories. In the document Markopolos states:

Bernie Madoff is running the world's largest unregistered hedge fund. He's organized this business as [a] "hedge fund of funds privately labeling their own hedge funds which Bernie Madoff secretly runs for them using a split-strike conversion strategy getting paid only trading commissions which are not disclosed."

On June 3, 2009 Markopolos told a conference at Boston College, his graduate-school alma mater, that he believes Bernard Madoff personally kept less than 1 percent of the $65 billion reported stolen, and will probably lose what remains of his cut to money launderers. Markopolos estimates that $35 billion to $55 billion of the money Madoff claimed to have stolen never really existed, simply fictional profits he reported. Markopolos believes that his customers lost $10 billion to $35 billion, most of which went to early investors. "Madoff will wind up in a special prison designed as much to keep the crook’s victims out as Madoff in. He’s a guy who can’t afford not to be in prison,” he said.

On February 4, 2009, he testified before the United States Congress' House Financial Services Committee’s capital markets panel and on March 1, appeared on CBS's 60 Minutes. “Nothing was done. There was an abject failure by the regulatory agencies we entrust as our watchdog,” he explained in 65 pages of prepared testimony. Describing Madoff as “one of the most powerful men on Wall Street,” Markopolos stated that there was “great danger” in raising questions about him: "My team and I surmised that if Mr. Madoff gained knowledge of our activities, he may feel threatened enough to seek to stifle us.” He testified that he feared for his, as well as his family's safety, until after Madoff's arrest, when the SEC finally acknowledged that it had received "credible evidence" of Madoff's Ponzi scheme years before. He explained that Madoff's "math never made sense," that his "return stream never resembled any known financial instrument or strategy," and that Madoff wasn't making the volumes of trades he claimed.

Markopolos had originally concealed his identity from SEC regulators in May 1999, although he did meet face-to-face with SEC officials in Boston in 2000 and 2001. After the SEC did not respond, Markopolos was fearful of taking his complaints to the industry's self-regulatory authority, the National Association of Securities Dealers (since succeeded by the Financial Industry Regulatory Authority (FINRA)), because of the power Bernie Madoff's brother, Peter, had in that organization (he is a former Vice Chairman). Markopolos believed the Federal Bureau of Investigation would reject his allegations without the SEC staff's endorsement. He believed only one SEC staff member, Ed Manion, understood Madoff’s scheme and “the threat it posed to the public.” “My experiences with other SEC officials proved to be a systemic disappointment and led me to conclude that the SEC securities' lawyers, if only through their investigative ineptitude and financial illiteracy, colluded to maintain large frauds such as the one to which Madoff later confessed."

He also added that in 2005 it was Meaghan Cheung, a branch chief in the SEC’s New York office, to whom he gave his 21-page report alleging that Madoff was paying off old investors with money from fresh recruits. “Ms. Cheung never expressed even the slightest interest in asking me questions,” Markopolos said. Cheung approved an internal memo in November, 2007 to close an SEC investigation of Madoff without bringing any claim. Subsequently, she left the agency. Markopolos also testified he gave details about the case in 2005 to John Wilke, a Wall Street Journal investigative reporter, but that it was never pursued. Markopolos testified he (anonymously) sent a package of documents concerning Madoff to former New York Attorney General Eliot Spitzer, who had successfully prosecuted a number of securities fraud cases, but that Spitzer took no apparent action, either. Spitzer's family trust had invested in Madoff.

"Government has coddled, accepted, and ignored White-collar crime for too long," he testified. "It is time the nation woke up and realized that it's not the armed robbers or drug dealers who cause the most economic harm, it's the white collar criminals living in the most expensive homes who have the most impressive resumes who harm us the most. They steal our pensions, bankrupt our companies, and destroy thousands of jobs, ruining countless lives." He testified to Rep. Gary Ackerman-D-NY that he has never been compensated for his efforts. "I did it for our (American) flag, for patriotism." Markopolos presented recommendations to improve the SEC's operations, which included mandatory department standards: Good ethics, full transparency, full disclosure, and fair dealing for all.

The SEC must establish a unit to accept whistleblower tips, and move its activity closer to financial centers away from [[Washington, D.C.]]

His testimony included a reference to another $1 billion Ponzi fraud, which he shared the following day with SEC Inspector General H. David Kotz, who gave the tips to SEC Chairman Mary Schapiro.

He also disclosed information regarding a dozen as-yet-unknown foreign Madoff [[feeder fund]]s, “hiding in the weeds” in Europe, whose  silent victims likely included [[Russian Mafia|Russian mobsters]] and [[Latin American]] [[drug cartels]], “dirty money” investors. Markopolos remarked that European royal families had also lost assets.

As a result of the Madoff scandal, the SEC's chairman Christopher Cox stated that an investigation will delve into "all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm." A former SEC compliance officer, Eric Swanson, married Madoff's niece Shana, a Madoff firm compliance attorney.

In an April 2009, interview, Markopolos expressed no interest in a political career.

"I'm definitely not in the running for any public office. I know I have been approached already, and have said no and will continue to say no. It is not in my future. I'm apolitical. I support all third party candidates. I think they have a voice that needs to be heard, I wish America would listen to voices outside the two major parties. I think it is time for change.We've had Democratic and Republican parties in existence for well over a century each and maybe it's time for something new, something different. It is time to embody a party that really reflects America's core values."

Markopolos's account of the Madoff scandal, A True Financial Thriller, was released in March 2010.