Bernard Madoff

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Bernard Madoff and the 2008 Financial Crisis On December 11, 2008, the Securities and Exchange Commission (“SEC”) charged and arrested Bernard Madoff and his investment firm, Bernard L. Madoff Investment Securities LLC, with securities fraud for a multi-billion dollar Ponzi scheme. On March 12, 2009, Madoff pled guilty to an 11-count criminal complaint admitting to running an international Ponzi scheme and defrauding thousands of investors. The SEC defines a Ponzi scheme as an investment fund that involves the payment of purported returns to existing investors from funds contributed by new investors (SEC). In the 1920s, the originator of the Ponzi scheme, Charles Ponzi, conned thousands of New England residents into investing in a…show more content…
Peter was hired as the head of compliance and de facto COO for the legitimate trading business. He was Madoff’s right hand man and most valued business asset. Andy possessed a holistic view of complex technological issues, but was viewed by his employees as someone who was unapproachable and haughty. Mark ran the main trading business and was thought to have been the heir to the Madoff throne (Fortune). Bernard L. Madoff Investment Securities occupied 2.5 floors in the Lipstick building located in New York City. The main trading floor was on 19; the software programmers were stationed on 18 and the lucrative hedge fund operations was stationed on the 17th floor. To the traders, the 17th floor was off limits and was kept a secret. One trader recalls, “We knew it was statistically impossible [to have the steady gains for which Madoff became famous]. We always kind of wondered: How the hell does he do it?, You’d say, There couldn’t be anything bad. The Madoffs had such a name – and such an aura” (Fortune). At first, he handled the money of a small circle of friends and family offering them high returns with little risk. Over time, he delivered on his promises and the inner circle of investors began to grow. Jerry Reisman, a lawyer in New York who knew Madoff socially, said Madoff would approach these individuals, “In a social setting – that is where it always happened.” These

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