The Largest Ponzi Scheme In History

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.

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Many times in a Ponzi scheme the offender targets people they do not know personally but not Madoff. He had family, friends, employees and even charities and non-profit organizations as investors. “He tapped local money pulled in from country clubs and charity dinners, where investors sought him out to casually plead with him to manage their savings so they could start reaping the steady, solid returns their envied friends were getting” (Colesanti, 2012). “Levy invested $100,000” for Dell’Orefice, who felt honored to be a part of the “exclusive fund” (Lewis, 2010). Sheryl Weinstein, who was a friend of Madoffs for nearly 24 years, lost her entire savings to Madoff’s Ponzi scheme. “The charitable foundation of philanthropist Carl Shapiro had invested about 45 percent of its assets ($345 million) in Madoff's fund” (Auerbach, 2009). It is “estimated that Madoff's scam cost Jewish philanthropies at least $600 million, and

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

Bernie Madoff started his own market maker firm in 1960 and was an influential individual in the startup of the Nasdaq stock market. He also was on the board of National Association of Securities Dealers and an advisor to the Securities and Exchange Commission on trading securities. This extensive and impressive background in the investment industry allowed him to build and maintain the largest known Ponzi scheme is United States history. Under this Ponzi scheme, Madoff used the money coming in from new investors to pay the previous investors the promised 50% returns in 90 days. Investors would buy into Madoff’s investment plans and invest more money while more investors would join. The exact start date of Madoff’s Ponzi scheme is unknown,

Bernie Madoff is a very well-known criminal that committed the biggest fraudulent scheme in U.S. history. He got caught in December 2008 and was sentenced to 150 years in prison for that. He used convinced thousands of investors to give him their savings and made them believe that they were investing their money in something special. He guaranteed high and stable returns to his investors. Madoff used a so-called Ponzi scheme which originated with Charles Ponzi, who promised the investors 50% returns on investments in only 90 days. He made the operation seems real and profitable, even though no actual profit is being made. He used the funds from the new investors

The premise of a Ponzi scheme is more smoke and mirrors. Investors are made to believe they are receiving a return on their investments when in actuality their return is just a new investment from a new investor. This is just a vicious cycle of money coming in, money going out. Eventually, a Ponzi scheme will run out of new investors leaving those waiting for an unfunded

This cohort believes there is nothing wrong with investments especially if you are investing in the rights things. The bible says, “For where your treasure is, there your heart will be also” (Matthew 6:19-21). Notwithstanding, everyone should guard themselves against illegal and unethical Ponzi Schemes. Not to sound so spiritual, but in this cohort opinion, the first thing to do to ensure that Ponzi schemes like Bernard Madoff do not happen in the future is the pray, considering even the best can be tricked just as so many professionals before. Ponzi schemes are illegal and unethical and will bring hurt, pain, and anguish especially for those who are last to participate.

According to Ferrell , Fraedrich and Ferrell (2015) text, The Chair of SEC disclosed that the SEC examiner missed several red flags while reviewing the Madoff firm. Madoff also admitted to the unethical and illegal behavior of deceit. Madoff disclosed operating the Ponzi scheme since 1990 (Ferrell, Fraedrich, & Ferrell, 2015). The Ponzi scheme was very successful until the crash of the economy and the inability to bring in new investors. Madoff was able to maintain this scheme for well over 30 years. There had to be several accomplices that were intended or unintended participants.

In closing, stock market investing is a risky endeavor. But, it should not be complicated by people like Bernard Madoff. Furthermore, one should develop a sense of doubt when someone makes promises that are obviously

When the financial crisis of 2008 struck the world, there were multiple business scams and schemes that became exposed, creating a colossal uproar and unrest around the world. When the stock market collapsed, people all across America took a hit, with 2.4 trillion dollars of the Americans people’s savings vanishing in just a few weeks. This financial crisis also brought to light an unprecedented amount of fraud, over exposing people who were cutting corners. One of the most famous scams that surfaced in late 2008 was operated and executed by Bernard Madoff, in which he perpetrated the largest Ponzi scam in American history. A Ponzi scheme is a simple swindle where by one set of investors are paid unreal returns out of money received from another investor. A Ponzi scheme is however always disaster prone from the beginning as there is never a strategy to wholly recoup investors money.

Being an investor and investment adviser, Bernard Madoff started off his career as a legitimate and successful businessman also serving as chairman of NASDAQ for several years. Being well respected and unfortunately blindly trusted, Bernard Madoff began to collect investors and clients into his now know Ponzi scheme. Bernard Madoff’s scheme was simply to continually pay high returns to existing clients with the funds brought in by new investors without undertaking in any form of legitimate investment activity. Bernard Madoff was able use his reputation and connections on Wall Street to deceived investors out of billions of dollars by promising high returns with little to no work on their part. They figured it was an easy win on their part, which was ultimately their downfall.

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.

It will be hard to ensure that Ponzi schemes like Madoff’s do not happen in the future, it is not likely that anything can stop illegal financial schemes from happening. No matter how strict the regulations, people with motivation to do so will always find loopholes. Clearly, regulation is necessary to create disincentives for Madoff-like schemes, but too much regulation can be very costly, time-consuming, and anti-competitive. International businesses would be less likely to invest in the United States if the legal and compliance system were excessively complicated or expensive. It is estimated that due to the Ponzi scheme, Bernard Madoff Investment Service lost 20 billion U.S. dollars of investment 8 billion dollars at R. Allen Stanford,

A Ponzi scheme is an illegal business practice in which new investor’s money is used to make payments to earlier investors. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity. The returns are repaid out of new investors’ principal, but not from profits. This can continue as long as new investors line up with cash, and old investors don’t try to withdraw too much of their money at once.