Madoff Scandal

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Contents Introduction 2 Early Career 2 The Firm 3 Sales Strategy 4 Investment Strategy 5 The Scandal 7 He was not alone 9 The Markopolos Whistle 11 The collapse 13 Charges and Sentence 13 The Victims 14 2009 Ponzi Schemes 16 The SEC Failure 17 SEC post- Madoff 19 Hedge Fund Transparency 20 Conclusion 21 Bibliography 25 Tables Table 1: List of Madoff Clients (taken from the "The New York Times", last updated June 24, 2009) 15 Table 2: 2009 Ponzi Scheme SEC Charges 17 Figures Figure 1 Fairfield Sentry vs Gateway 6 Figure 2 Madoff Investor Funds (taken from http://orgnet.com/madoff.html) 7 Introduction Operating from central Manhattan, Bernie Madoff developed the first and biggest global Ponzi scheme, an event…show more content…
He attracted billions of dollars and several large hedge funds also invested in the firm because he did not charge usual fees and only collected fees for processing trades. Madoff offered modest and steady returns to exclusive clients instead of offering high returns to all clients, giving the appearance of his firm to be exclusive. The firm’s annual returns were abnormally consistent, a key factor in achieving the fraud.7 Most business men believed the story that a single person could generate returns of 12 to 13 percent a year trading the stock market no matter what happens without a single down quarter.7 Some of these people applied for membership to the clubs that Madoff was a member of, in order to meet and be accepted by him. In addition, he never hustled anyone for investing with him; instead he let them come to him. Thus, he created this aura of exclusivity around him and everyone wanted to be a part of his club. One of the groups targeted by Madoff was the “Jewish circuit.” Being Jewish, Madoff attracted many wealthy Jewish people he met at country clubs on Long Island and Palm Beach. This was an Affinity Ponzi Scheme, as it was called by Newsweek article.7 Affinity fraud includes investment frauds that prey upon members of identifiable groups, such as religious or ethnic communities, language minorities, and the elderly or professional groups. Around 1995, some of

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