The Madoff Scandal

Introduction: Bernie Madoff was a well-respected financier, his company Bernard L. Madoff Investment Securities, LLC was very well known and even helped launch the Nasdaq stock market. Madoffs company was well trusted and he even had celebrity cliental such a Steven Spielberg, Kevin bacon, and Kyra Sedgwick. Madoff came from a low income family however, he was able to start his company from getting a $50,000 loan from his in-laws and he using money that he had saved from side jobs such as lifeguarding and installing sprinkler systems to found his company. The successfulness of Madoff’s company came from the company’s ability to adapt to change and us modern day computer technology. As his business grew he stated employing family members to help “His younger brother, Peter, joined him in the business in 1970 and became the firm 's chief compliance officer. Later, Madoff 's sons, Andrew and Mark, also worked for the company as traders. Peter 's daughter, Shana, became a rules-compliance lawyer for the trading division of her uncle 's firm, and his son, Roger, joined the firm before his death in 2006”(Bernard Madoff Biography 2016) Unfortunately on December 11th 2008 Bernie Madoff became well known for a whole new reason. He had been accused of performing an elaborate Ponzi scheme and he had been reported to the federal authorities by his own sons. A year later he admitted to the investigators that he had lost $50 billion dollars of his investors’ money and pled guilty to 11

Bernie Madoff, son of Ralph and Sylvia Madoff, grew up in a modest three-bedroom home in Laurelton, a small middle class area outside of Queens, New York. Little is known about Bernie’s parents, except each had one or more issues with the government. Ralph, had a tax debt in excess of $13,000, placing a lien on his home, assessed in 1956 and not paid until 1965. Sylvia was part of Securities and Exchange Commission (SEC) proceedings in 1963 to determine if broker-dealers of Gibralter Securities failed to report financial conditions, which could revoke their registrations. However, in 1964, the SEC dismissed the proceedings with what appeared to be a deal for these identified individuals to stay out of the business.

In 2006 when the SEC launched an investigation into Madoff’s dealings it was from persuasion from Markopolos that Madoff was running a Ponzi scheme and he was also a key source for the Mar/Hedge article. The SEC also examined whether Fairfield Greenwich, a giant feeder fund, was properly disclosing the extent of its reliance on Madoff. According to research by Harry Markopolos, it grew from as much as $7 billion in 2000 to as much as $50 billion by the end of 2005. What had started decades before as a small-time recruiting effort by Madoff agents at country clubs had gone global. Massive international institutions such as Grupo Santander, Fortis Bank, and Union Bancaire Privée were all funneling billions -- sometimes through intermediaries -- to Madoff, lured by the call of steady 10% to 12% returns. Even one of the world's biggest sovereign funds, the Abu Dhabi Investment Authority, ended up sinking tens of millions of

Bernard Lawrence “Bernie Madoff” is an American former stock broker, investment adviser, non-executive chairman of the NASDAQ stock market, and the admitted operator of what has been described as the largest Ponzi scheme in history. (Bernard Madoff, 2011) This paper discusses the massive Ponzi scheme that Mr. Madoff created and those that were affected by it.

On Dec. 11, 2008, Bernard Lawrence Madoff confessed that his vaunted investment business was all "one big lie," a Ponzi scheme colossal in volume and scope that cost investors $65 billion. Overnight, Madoff became the new poster child for Wall Street gall, greed and

An all-around regarded lender, Madoff persuaded thousands regarding financial specialists to hand over their funds, dishonestly encouraging steady benefits consequently. His misconduct was noticed in December 2008 and accused of extortion, illegal tax avoidance, evasion, and burglary. Madoff utilized the alleged Ponzi conspiracy, which attracted several financial specialists in by ensuring uncommonly noteworthy earnings. The name begun with Charles Ponzi, who guaranteed half profits for interests in just short notice. Ponzi plans were controlled by a main administrator, who utilized the cash from new, approaching financial specialists to pay off the guaranteed original returners. That plan made the operation appear to be productive, despite

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

Even during these early days in business Mr. Madoff practiced some shady business ethics. Mr. Madoff began to have his father-in-law “manage” the new clients that he brought to invest with Bernie (PBS.org, 2009). Bernie was also not licensed as an investment advisor for the number of clients he had grown to serve. State and Federal securities regulation during the time period was slack and Mr. Madoff was just one of many advisors without proper licensing.

As long ago as 1999, an independent investigator, Harry Markopolos, concluded that Madoff’s success could not be legitimate. In 1995, he sent the US Securities and Exchange Commission a 17 page document titled: “The World’s Largest Hedge Fund Is a Fraud”. Two years later the SEC found no evidence of fraud after an investigation that seems to only involve just a little more effort than simply asking Madoff if he was a criminal or not, and then excepting his answer.

Bernard Madoff founded his first company in 1960, an Investment Securities business in which Madoff’s methods were considered very up to date. He was known as a pioneer in electronic trading. As Madoff’s business started to flourish in the early 2000’s, he became the go to guys that people at the Securities and Exchange Commission turned to and trusted. He was a highly respected individual in his field. Bernard Madoff’s firm became one of the major market makers in the US, and by 2008, Madoff Investment Securities was the sixth largest market maker on Wall Street (The Wall Street Journal, “the

Bernard Madoff and even many of his investors and accomplices lacked the desire to demonstrate social responsibility. Solely for the profit, Bernie Madoff and his accomplices created and participated in what can be considered the greatest Ponzi scheme in history. It’s believe that the reason that the scheme went on as long as it did was because the participants were financially rewarded for their silence. Preferred employees were paid well and it bought their silence and loyalty. There was little need or appreciation for honesty and professional business ethics with Madoff and his accomplices when it came to their organization. “Trust and a good reputation are some of your company’s most valuable

Bernard Madoff had full control of the organizational leadership of Bernard Madoff Investments Securities LLC. Madoff used charisma to convince his friends, members of elite groups, and his employees to believe in him. He tricked his clients into believing that they were investing in something special. He would often turn potential investors down, which helped Bernard in targeting the investors with more money to invest. Bernard Madoff created a system which promised high returns in the short term and was nothing but the Ponzi scheme. The system’s idea relied on funds from the new investors to pay misrepresented and extremely high returns to existing investors. He was doing this for years; convincing wealthy individuals and charities to

The Bernard Madoff scandal is a well-known instance of fraud. In fact, it is the largest stock fraud case, the largest ponzi scheme, and the largest international fraud case in history. Mr. Madoff’s scheme totaled just under 65 billion dollars over 35 years. He stole from his friends, community members, celebrities, and even royalty. Elmore Leonard, a popular novelist and screenwriter, said “Psychopaths [are] people who know the differences between right and wrong, but don 't give a shit.” I believe that Mr. Madoff is such a person. How he was able to remain undiscovered for such a long period of time is truly a marvel. Mr. Madoff’s story seems to come straight from the screens of Hollywood.

Madoff Securities Inc., had limited resources and fragmented oversight. The fragmented oversight led to the lack of coordination in preventing fraud at the company. The company has fragmented regulatory system that allowed unscrupulous people to engage in misconduct. For instance, the regulatory oversight was unable to examine the broker dealer operations of Madoff Investment securities. The lack of resources also affects the ability of the company to deal with financial and credit crisis (Hornuf & Haas, 2014). Most importantly, the company lacked regular examination of audit procedures in analyzing the fraudulent actions. The regulatory oversights have various gaps in regulation that allowed investment and broker dealers to form unclear

The illegal construction of the Bernie Madoff securities pyramid scheme grew to preposterous proportions from legal, auditing, and regulatory weaknesses of the Securities Exchange Commission, the designated regulatory body of the U.S. financial markets. The required expertise, authority, and relevant penalties needed to deter management from committing ethical breaches lacked substance in the case study of BMIS (Crews 11). Even after the wake of the Enron and WorldCom scandals that occurred in the early 2000s, the SEC unexplainably revoked provisions created to help avoid fraud. The provision the SEC revoked specifically mandated firms structured like Madoff’s to be audited by accounting firms registered and audited by the Board. By revoking the provision, BMIS was allowed to continue its Ponzi scheme for another half a decade with the aid of utilizing an unregistered, small accounting firm called Freihling & Horowitz (“Madoff’s Jenga”