Madoff Ethics Case Study

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Executive Summary Overview Since the ascent of money, different techniques have been developed and carried out to fool people of their assets. These methods have evolved together with advances in technology, and some have proved to be more efficient than other. This case study is chronology of the largest Ponzi scheme in history. Bernie Madoff began his brokerage firm in 1960 and grew it into one of the largest on Wall Street, New York, USA .While doing so; he began investing money as a favor to family and friends, though he was not licensed to do so. Over a period of fifty years, these side investments became an investment fund that mushroomed into a $50 billion Ponzi scheme. Bernie pled guilty without a trial on March 12, 2009, and…show more content…
With all the knowledge about the sophisticated financial instruments, Madoff still forgot the fundamental element of Ponzi scheme. Opportunities * The Ponzi scheme was started at a time when the Economy was favorable for investments. * The Madoff family had through the years gained access to the Washington lawmakers and regulators. Madoff himself was a chairman on the board of the Securities Industry Association, later merged into SIFMA where his brother Peter Madoff sat as a member of the board. Also, Madoff’s niece Shana Madoff married SEC compliance official Eric Swanson, directly tying the Madoff family to the SEC. * Mitchell Zuckoff, a professor of journalism at Boston University, says that the “5% payout rule” helped Madoff in going undetected for a long while. The federal law requires private foundations to pay out 5% of their funds every year. Because Madoff mainly managed money for charities, he could therefore avoid sudden or unexpected withdrawals. Given a $1 billion investment, the fraud could go on for 20 years, handing out $50 million each year, without even taking in new investors. * The biggest reason for Madoff’s ability to avoid problems for such a long time was the SEC who didn’t interfere with Madoff’s investment company despite receiving warning flags for almost a decade before the actual arrest. Threats * The onset of recession in the year 2007 marked the end for Madoff when clients demanded their money back.
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