Bernie Madoff Ponzi Scheme

Bernie Madoff began his career as an investment broker in 1960, where he legally bought and sold over-the-counter stocks not listed on the New York Stock Exchange (NYSE). From the 1960’s through the 1990’s, Madoff’s success and business grew substantially, mainly from a closed circle of known investors and friends through word of mouth. In the 1990’s Bernard L. Madoff Investment Securities traded up to 10 percent of the NASDAQ on any given day. With the success of the securities business, Madoff started an illegal money-management business, promising his investors consistent returns from 10-12 percent, unheard of returns at the time, which should have tipped off most investors that something was amiss.

Bernie Madoff's conning of some of the world's wealthiest and most powerful people has been called the greatest Ponzi scheme of all time. Many of his victims were not na誰ve and credulous, but rather prominent members of the world of entertainment and finance including billionaires like Steven Spielberg; the owner of the Mets; Carl Shapiro, and Jewish charities, including one run by Nobel Prize winner and Holocaust survivor Elie Wiesel (Con of the century, 2008, The Economist). Reputable banks such as Santander and HSBC funneled money to Madoff's faux investment firm.

In December 2008, one of the largest Ponzi scheme surfaced when Mark and Andrew Madoff reported the works of their father, Bernard Madoff to the federal authorities. A Ponzi scheme is an investing scam that promises high rates of return with little risk to investors. The operator generates returns for older investors by gaining new investors. Bernard was arrested on December 11, 2008 and charged with securities fraud. He pled guilty to 11 counts and was sentenced to 150 years in federal prison-the maximum possible prison sentence. A reported $17.3 billion was invested into the scam by Bernie’s clients and only about $2.48 billion have been returned to these victims as of September 2012.

Madoff’s scheme to defraud his clients at Bernard Lawrence Madoff Investment Securities began as early as 1980 and lasted until its exposure in 2008. Bernard carried out this scheme by soliciting billions of dollars under false pretenses, failing to invest investors’ funds as promised, and misappropriating and converting investors’ funds to benefit Madoff, himself, and others without the knowledge or authority of the investors. To execute the scheme, Madoff solicited and caused others to solicit potential clients to open trading accounts with Bernard Lawrence Madoff Investment Securities (BLMIS) on the basis of a promise from him. He promised to use investor funds to purchase

On Dec. 11, 2008, Bernard Lawrence Madoff confessed that his vaunted investment business was all "one big lie," a Ponzi scheme colossal in volume and scope that cost investors $65 billion. Overnight, Madoff became the new poster child for Wall Street gall, greed and

Bernie Madoff was convicted of $65 billion in a Ponzi scheme investment that started in the early 1990s (Ferrell, Fraedrich, & Ferrell, 2013). Ponzi schemes were named after Charles Ponzi, a man who told investors he could make them money by swapping out international coupons for more expensive stamps in countries where they were more expensive and have a higher value (Ferrell, et al, 2013). When Madoff started his proprietorship, Madoff Securities, in 1960, serving as a “wholesaler” between institutional investors (Ferrell, et al, 2013). He moved Madoff Securities from Wall Street to Third Avenue so he was able to make changes electronically easier. Serving as chairman on the NASDAQ, a seat on the government advisory board, and throughout his investment career of networking, Bernie became very well trusted and gained the likes of new investors.

Schneeweis &Szado (2010, p.9) suggested that ffinancial fraud in general and Ponzi schemes in particular continue to maneuver investors. A Ponzi scheme is frequently described as a securities fraud in which the investment manager is in fact taking money from new investors to fund redemptions from current investors. These strategies are often discovered when new investors cannot be found to offset redemptions from current investors. The Ponzi method received its name from Charles Ponzi, who marketed an investment based on managing the International Postal Reply Coupons. Ponzi suggested that an arbitrage opportunity existed because he could exchange U.S. dollars into the necessary foreign currency, and use the foreign currency to purchase postal reply coupons. The postal reply coupons could be redeemed for U.S. postage stamps, which could then be sold for U.S. dollars. Ponzi promoted unusually high returns to investors when in fact he simply used the new investment to pay of the previous investors. While the scheme soon collapsed, there are similarities between him and the Madoff scheme. For example, Madoff sold primarily to the Jewish community and also Ponzi sold primarily to the immigrant community of the North End of Boston, to which he belonged. Along with that, the validity of Madoff's strategy was a subject argued by the public press (Barron's) as well as by individuals (Markopolus) on the grounds. Comparable to Ponzi's investors, Madoff’s investors, have received

To be aware of the biggest Ponzi scheme, and to understand how it works. IV. Today I will talk about the biggest Ponzi scheme in history which was run by Bernie Madoff. I will answer how he began and made it successful, how it effected investors and other people, and what was the outcome of it. Transition: How did Bernie Madoff start off?

Introduction Bernard Lawrence "Bernie" Madoff ran one of the largest Ponzi Schemes. A Ponzi scheme is a scam investment designed to separate investors from their money. It is named after Charles Ponzi, who constructed one such scheme at the beginning of the 20th century. The scheme is designed to convince the public to place their money into a fraudulent investment. Once the scam artist feels that enough money has been collected he disappears taking all the money with him.

The Bernie Madoff Ponzi Scheme is a well-known case and is known as one of the biggest Ponzi scheme’s. In summary the scheme occurred for many reasons that I will some up into 3 points; A lack in competency by regulatory agencies, a lack of regulation, and finally a breach in ethics by Bernie Madoff himself. To explain further, the regulatory agencies like the lawyers and SEC are supposed to prevent schemes such as this one from happening but because they lacked the skills to correctly assess the situation, interpreting the number of tips they had received regarding scheme that had been filed, and to act on those in an efficient manner. One of the tips was made by Harry Markopolos in 2000, of who correctly predicted that

Ponzi fooled thousands of investors, he promised huge earnings on international reply coupons, which could be acquired in one country and used for postage stamps in another country. The income would be the difference in price between the two countries. He converted a millionaire in a few months, but the scam took him down. Some parties started to investigate the accounts because there weren 't enough international coupons for his investment strategy to function. Actually, Ponzi was paying his investors with newer investors ' money, staying with a huge quantity. In a few months, Ponzi acquired $20 million, equivalent to $222 million in current dollar values, and six banks crumbled. On the other hand, Bernie Madoff, a respectable financier, used the famous Ponzi scheme, which attracts investors in by warranting high revenues. As mention before, Ponzi schemes consisted in using money from new investors to pay off the guaranteed returns to the older investors. This makes the investment look valid and profitable, even that was not generating any profit. In Madoff 's case, things began to complicate after clients demanded a total of $7 billion back in returns. Unfortunately for Bernie, he did not have enough money to give back to his investors. According to CNNMoney, he only made $20 billion, even though he cheated investors out of $65 billion.

I think Bernard Madoff engaged in creating a Ponzi scheme because of greed. His unethical behavior was based on white collar crime (Ferrell, Fraedrich, & Ferrell, 2013). Mr. Madoff met the characteristics of a white collar criminal. The characteristics consist of people who are highly educated and considered as reliable among their subordinates and peers. They are usually in an executive position that would give them the power to commit their crimes to their company, employees, and investors (Ferrell, et al, 2013).

After Bernard Madoff, a former NASDAQ chairman, was arrested on December 11, 2008, he acknowledged that his performance was nothing but the Ponzi scheme. He pled guilty to the biggest investor fraud ever committed by anyone on March 12, 2009. On June 29, 2009, he was sentenced to 150 years in prison.

This paper introduces Bernard L. Madoff a fraudster who orchestrated a multi-billion dollar Ponzi scheme. The paper discusses elements that make up a Ponzi scheme and explains what a Ponzi scheme is. The paper goes on to introduce some of the victim’s and examines some reasons why someone might fall victim to a Ponzi scheme. The paper describes the three elements making up the fraud triangle and how they relate to the fraud and the fraudster. This paper covers Bernard Madoff’s background and history and how he committed the fraud analyzing the fraud triangle. The paper describes ways to correct the issue, accounting principles violated, and recommendations for a fix. Finally, the paper looks at internal and external controls violated and ends with a conclusion.

Operated through a complex, cryptic structure Bernie Madoff, CEO of Bernie L. Madoff Investment Securities (BMIS), perpetuated the most embellished Ponzi scheme the world has ever seen. The basis of the securities fraud that took place approximately between 1991 – 2008 was influenced by Bernie Madoff’s reliance upon an unqualified staff, outdated software, organizational seclusion, a personal halo effect, and weaknesses in the regulating body. Madoff had the confidence of the public, yet to pull off such an elaborate scheme, he relied on a startling number of family members, vital accomplices working on the illegal trading floor such as Frank D. Pascali, IT staff members, and a separate BMIS branch of international employees