Bernard Madoff

2362 Words10 Pages
MVE220 Financial Risk

The Madoff Fraud

Shahin Zarrabi – 9111194354 Lennart Lundberg – 9106102115

Abstract: A short explanation of the Ponzi scheme carried out by Bernard Madoff, the explanation to how it could go on for such a long period of time and an investigation on how it could be prevented in the future. The report were written jointly by the group members and the analysis was made from discussion within the group

1. Introduction Since the ascent of
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As a result of these precautions and many more, explained in the next section, it took until late 2008 before the scam was exposed, although people had accused the so-called hedge fund for fraud as early as 2001.

Exposure and punishment

The ones who finally exposed the scam were Bernard Madoff’s sons, Andrew and Mark Bernard, who after they found out that the company was based on a Ponzi scheme reported it to the authorities. This resulted in the arrest of Madoff on December 11th, 2008. He was accused of fraud and the embezzling of up to 65 billion dollars. He pled guilty to all charges, including money laundering, mail fraud and making false filings, and in June 2009, Madoff was sentenced to serve 150 years in prison [6].

3. How could this happen? So how could Madoff pull off the biggest Ponzi scheme in the history of finance? The question should rather be why the SEC, the U.S. Securities and Exchange Comission, didn’t interfere with Madoff’s investment company despite receiving warning flags for almost a decade before the actual arrest. A quick introduction to Harry Markopolos In 1999, Harry Markopolos, a former securities industry executive, received information about a fund running $6 billion, which would make it one of the biggest funds on Wall Street at the

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