Bernie Madoff Ponzi Scheme Analysis

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Just a little over five years ago one man named Bernie Madoff was sentenced to 150 years in prison for running the biggest fraudulent scheme the U.S. has ever seen. (Yang, Stephanie. "5 Years Ago Bernie Madoff Was Sentenced to 150 Years In Prison – Here's How His Scheme Worked." Business Insider. Business Insider, Inc., 2014.) Still till this day many of the people caught in this scheme have not regained what they contributed towards this scheme. In his time Madoff made over $65 billion dollars from people he got to believe to invest in him. He was well respected and worked in finance in which during his run he falsely advertised for his investor’s consistent profits if they were to donate. Which leads to the question, what kind of scheme …show more content…

A Ponzi scheme is an investment operation in which the operator or the individual running it promises to pay returns from new capital paid from new investors to existing investors rather than profit from the operator. ("Fast Answers." The people who run Ponzi schemes are usually people with current businesses that they can use as front to entice future investors into the scheme. The scheme usually seems very legitimate until the businesses cannot meet returns to all the investors; in which that’s when they start to question. Within a Ponzi scheme for example if you were to invest $1000 dollars to an operator, he or she would guarantee you a return of $2000 dollars back for your investment. The scheme comes from Charles Ponzi ("Ponzi Schemes". US Social Security Administration. Retrieved 24 December 2008.) Who used the scheme during the 1920’s to make money from the arbitrage of international reply coupons for postage stamps, and would take the new investments coming in to pay earlier investors back or …show more content…

An investor informed his sons that Bernie planned to give out millions in bonuses earlier than scheduled, and the investors became curious and demanded to know where the money was coming from. Soon after Madoff was arrested and charged with securities fraud. Madoff admitted to investigators that within the Ponzi scheme he was running he lost over $50 Billion of investors’ money. He was ultimately charged with 11 felony counts: securities fraud, investment adviser fraud, and mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the United States Securities and Exchange Commission (SEC) and theft from an employee benefit plan. The prosecutors investigating him estimates that over $170 billion moved through the scheme and Bernie Madoff was sentenced to 150 years in

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