No, he just straight up didn't invest peoples money, he paid out "gains" just from other deposits. That's why it was a Ponzi scheme - that's what they are.
Initially, he did invest their money, he just didn't get the (I believe it was) +/- 10% that he promised investors (and was getting like clockwork) before the 08 crash.
Once he started not being able to make those returns did thing start to unravel. His own kids were in denial right up until the end - almost nobody, even inside Bernie's firm, knew it was fraudulent.
No, he just straight up didn't invest peoples money, he paid out "gains" just from other deposits. That's why it was a Ponzi scheme - that's what they are.