Chapter 1

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Case 8: The Fraud of the Century: The Case of Bernard Madoff

Introduction

Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and the former non-executive chairman of the NASDAQ stock market. He is very successful in his early life. Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960 by buying and selling over-the- counter stocks that were not listed on the NYSE. As he became more successful, he moved the company’s headquarters from Wall Street to the famous “Lipstick Building” on Third Avenue. After that, Madoff started to help his investors to manage their money. He used Ponzi scheme to cheat his clients by promising of consistent returns of 10 to
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* Base on Madoff’s reputation, investors over trust him.
Weaknesses
* Madoff’s schemes need consistent money from new investors. During the recession, Madoff had difficult time to recruit the new investor. That’s how his schemes went down. * If lots of investors ask for cash out in the same time, that means Madoff needs to find more new money to run the schemes. * This can be considered as illegal fraud.
Opportunities
* More and more people like to invest their money before the recession.
Threats
* SEC and other investor will investigate Madoff’s firm * Accountant can check his transaction record.

1. What are the ethical issues involved in the Madoff case?
From an ethical perspective, this is an example of white- collar crime. Madoff is a typical white collar criminal who abused his trust for profits. In fact, Madoff ‘s business is a lie. He promised all the investors will get the high return. Actually no one knew what is going on and what the investment detail is. Investors did not realize the problem because they still earning profit from Madoff. As more and more new investors throw money in these schemes, Madoff still has enough flow of money to pay to the old investors. That’s how he conducting his game.

2. Do you believe that Bernard Madoff worked alone, or do you think he had help increating and sustaining his Ponzi scheme? Would this represent a conflict of interest?
I don’t think Madoff can do this by himself. In

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