...http://www.sec.gov/answers/ponzi.htm Who is Bernie Madoff? Bernard L. Madoff, who is currently serving a 150-year sentence in federal prison, orchestrated a multi-billion dollar Ponzi scheme that swindled money from thousands of investors. Unlike the promoters of many Ponzi schemes, Madoff did not promise spectacular short-term investment returns. Instead, his investors’ phony account statements showed moderate, but consistently positive returns — even during turbulent market conditions. In December 2008, the SEC charged Bernard Madoff and his investment firm, Bernard L. Madoff Investment Securities LLC, with securities fraud for the multi-billion dollar Ponzi scheme he perpetrated on advisory clients of his firm for many years. The SEC filed emergency motions to freeze assets and appoint a receiver, and worked to return as much money as possible to harmed investors. Madoff had been a prominent member of the securities industry throughout his career. He served as vice chairman of the NASD, a member of its board of governors, and chairman of its New York region. He was also a member of NASDAQ Stock Market’s board of governors and its executive committee and served as chairman of its trading committee. Madoff founded his investment advisory firm in 1960. http://www.time.com/time/business/article/0,8599,1866680,00.html BRIEF HISTORY OF A Brief History Of Ponzi Schemes By Alex Altman Monday, Dec. 15, 2008 Ponzi was a charismatic Italian immigrant who, in 1919 and 1920...
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...Bernard Madoff was either the most ethically void individual or he just had no regard for ethics. He managed to pull off one the largest Ponzi scheme in history with very little help. He had a legitimate stock trading business on one floor and his illegitimate investment management business was on another floor (Ferrell, Ferrell & Fraedrich, 2011). The top executives in the company were family which leads to the question, did they really not know? This paper will examine the origin of the Ponzi scheme, a brief history of Bernie Madoff, and the fallout as a result of his fraudulent business. A Ponzi scheme is “a fraudulent investment operation that pays returns to investors out of the money paid by subsequent investors rather than from legitimate profits (Fitzpatrick, 2010).” The Ponzi scheme was named after Carlo (Charles) Ponzi who fled Italy for America at the age of 21. In 1919 Ponzi developed a scheme to get investors to buy postage coupons in one country and then sell them for more money in another country (Wells, 2009). Instead of investing the money he used the pooled funds to pay investors. This lasted until 1920 when a federal audit confirmed he was bankrupt, he had scammed investors for more than $4 million (Wells, 2009). According to Wells (2009), the Madoff scheme “...may be the largest single fraud of any kind in history...” The estimated total of the Madoff scheme is $65 billion, it is the largest financial fraud in the history of Wall Street. On...
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...Bernard Madoff Research Paper Bernard (Bernie) Madoff committed this century’s largest Ponzi scheme to date. First we will define Ponzi Scheme – it is a fraudulent pyramid scheme where original investors are paid their gains out of new investors money so it would appear to old investor that the scheme (business) is producing an unusually large return (Albrecht, 2009). The Ponzi scheme that Madoff created and pulled off for years was quite intricate. In a standard pyramid scheme each victim unknowingly brings in more and more victims, where as a Ponzi scheme has a single entity (group or individual) to keep up with and organize the fraud. The operator of the Ponzi scheme then will take new money brought in from recent investors and pay off previous investors. For this to continue on there must be a constant influx of new investors so there must be someone working that angle on a regular basis. Eventually the group of new investors will run out because the funds dry up. In a lot of Ponzi schemes when they begin to run low on victims things seem to fall apart and investors loose it all. In some cases the perpetuator escapes the area with all the money he / she have scammed. When or if they are caught the perpetuator will have to face prosecution and / or repayment of all money to victims and possible jail / prison time or pay restitution to the government. In some cases there are assets seized to reimburse victims and pay restitution (Smith, 2011). Madoff committed...
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...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 was sentenced to 150 years in prison. Thousands of wealthy clients, philanthropic organizations and middle class people whose pension funds found their way into Bernie’s investment fund lost their life savings. Background In December 2008, the highly respected American businessman Bernard Madoff made the headlines when the US authorities accused him of orchestrating a $50 billion Ponzi scheme which is the biggest financial frauds of all time and made of him “The Conman of the Century”. Bernard Madoff also called “Bernie" is a former American businessman, stockbroker, investment advisor, financier and the former non-executive chairman of the NASDAQ stock market and held a seat on the government advisory board on stock market regulation. During his entire long successful financial career Madoff has been considered as a trustworthy, well respected and responsible man. Bernie epitomized the American dream indeed he started a legal investment business in 1960 at...
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...Introduction Operated through a complex, cryptic structure Bernie Madoff, CEO of Bernie L. Madoff Investment Securities (BMIS), perpetuated the most embellished Ponzi scheme the world has ever seen. The basis of the securities fraud that took place approximately between 1991 – 2008 was influenced by Bernie Madoff’s reliance upon an unqualified staff, outdated software, organizational seclusion, a personal halo effect, and weaknesses in the regulating body. Madoff had the confidence of the public, yet to pull off such an elaborate scheme, he relied on a startling number of family members, vital accomplices working on the illegal trading floor such as Frank D. Pascali, IT staff members, and a separate BMIS branch of international employees in the U.K. to seemingly legitimize the whole thing. Domestic and European institutional investors, friends and acquaintances of Madoff’s, and an additional couple of thousand people who had exposure to BMIS funds, trusted as much as their entire life or retirement savings. Investors were dumbfounded when the jenga-like pyramid came crashing down on them, despite many caveats from whistleblowers. Leading up to December 11, 2008, the date Bernie Madoff was taken into federal custody, he acted especially cross and frantic, specifically when the SEC was mentioned. Another sign of the impending collapse was Bernie’s reluctance to accept any more large sums of money, contrast to the usually receptive Bernie (Henriques). As a result of Madoff’s arrest, further...
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...Bernie Madoff: The Makings of a Ponzi Scheme Brent Casebolt Keller Graduate School of Management Abstract This paper explores seven published articles that report on the story of Bernard Madoff. These articles were the results of research conducted on the internet and include well known publications and authors throughout the United States. Some articles paint a picture of the timeline that brought Bernie Madoff to his ultimate demise. From humble beginnings to Federal prisoner in North Carolina, the story is full of interesting facts and unbelievable occurrences. Other articles bring to life the sad story of other players involved in the Ponzi scheme. While others lay out in great detail the failings of our own government to put Bernie Madoff away much sooner than he was. Finally, this paper will explore the role of digital evidence in this Ponzi scheme and the simplicity of computer hardware and software involved. Bernie Madoff: The Makings of a Ponzi Scheme Bernie Madoff has been one of the most interesting and controversial figures in all of American financial industry history. In this paper, I will take you on a journey from his early childhood to his current status as a Federal prisoner in North Carolina. I will discuss all of the major players involved in the Ponzi scheme, the SEC’s failure to catch him on numerous occasions, and the digital evidence that he did or did not leave behind during his life of crime. After examining all of the above, I...
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...Bernie Madoff and The SEC Bernie Madoff is the face of multi-billion dollar Ponzi schemes that swindled money from investors. Madoff was a prominent member of the securities industry throughout his long career. He once served as a vice chairman of NASD, a member of its board of governors, and a chairman of its New York region. Also, he was a member of the NASDAQ Stock Market board of governors and its executive committee and served as a chairman of the trading committee. His own investment advisory firm, Bernard L. Madoff Investment Securities LLC, was founded in 1960. A Ponzi scheme is “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.” (US SEC, 2012) The organizers of such schemes, promise to invest their funds properly into new opportunities that have the chance to generate high returns with little to risk. Usually, the organizers look for new investors to make the promised payouts to those early stage investors. They can also use this money for personal expenses, instead of using it legitimately for investment activity. In 2008, the Securities Exchange Commission found Bernie Madoff and his investment firm guilty of securities fraud for the multi-billion dollar Ponzi scheme he ran on clients of his firm for years. “The SEC filed emergency motions to freeze assets and appoint a receiver, and worked to return as much money as possible to harmed investors.” US SEC. (2012) Madoff is now serving...
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...Case Study Bernie Madoff’s Ponzi Scheme: Reliable Returns from a Trustworthy Financial Adviser By Denis Collins Denis Collins is a professor of management in the School of Business at Edgewood College in Madison, Wisconsin. His research interests include business ethics, management, and organizational change. Contact: dcollins@ edgewood.edu A [person] is incapable of comprehending any argument that interferes with his revenue. Rene Descartes Overview This case study is a 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. 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. Bernie1 pled guilty without a trial on March 12, 2009, and was sentenced to 150 years in prison. Thousands of wealthy clients, philanthropic organizations, and middle-class people whose pension funds found their way into Bernie’s investment fund lost their life savings. What to Do? Bernie Madoff, at age 69, owned three very successful financial companies—a brokerage firm, a proprietary trading firm, and an investment advisory firm. On December 10, 2008, the brokerage and proprietary trading firms, managed by his brother and two sons, were performing as well as could be expected in the middle of a deep recession. His investment...
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...2015 Professor Mari Hadley Summary and Discussion The author provides an overview of the case of Bernard “Bernie” Madoff, a businessman and investment manager who is believed to have stolen as much as $65 billion from his investors (Stanwick & Stanwick, 2014). Bernie Madoff was operating not only the largest Ponzi scheme in history, but is also believed to have perpetrated the largest financial fraud in history. His network of investors included many prominent people from the financial world as well as the social elite. Madoff’s criminal career came to an end in 2008 when the recession developed. His supply of available funds began to diminish, and he was no longer able to pay his investors. Madoff was subsequently arrested, prosecuted, and sentenced to one hundred and fifty years in prison. The authors also discuss the question of how Madoff was able to maintain such a massive criminal operation over a twenty year period (Stanwick & Stanwick, 2014). In particular, the question is examined concerning why the Securities and Exchange Commission was not more thorough in its investigations of Madoff’s activities, especially after Harry Markopoulos had been warning the SEC for the better part of a decade that Madoff’s financial operations were questionable in nature. A discussion is also provided of how various warning signs were available, but how Madoff was able to manipulate potential investigators into failing to thoroughly investigate what he was doing. The impact...
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...Secrets, Lies and Bernie Madoff It seems like they all start the same – with Secrets and Lies. With secrets and all the don’t tell anyone because it is exclusive talk - that’s the stuff that makes soap operas, scandals and the greatest ponzi schemes. Everyone likes feeling like they have a great opportunity that not everyone gets to have and that it is exclusive, especially when it feeds their financial greed. Those are the ingredients that helped Bernie Madoff build the biggest Ponzi investment scheme in history. Madoff maintains that he never meant for it to be anything more than him investing for close friends and family however the secrecy and not accepting just anyone are part of what made so many people want to be a part, thereby becoming one of the best marketing tactics ever. The first question I wanted to know was who is this man that earned the respect of some of the biggest names on Wall Street, the trust of friends, family and strangers and where did he come from? • Start of firm senior in college The firm that Madoff started in 1960 with the $5,000 he saved was a trading business that specialized in the trading of penny stocks – Continued to earn money as a life guard and landscaper until his business took off • Bernard Madoff is a former financier, American hedge-fund investment manager, chairman of the NASDAQ (National Association of Securities Dealers Automated Quotations) stock exchange, and chairman of the firm Bernard...
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...Ponzi Scheme: A key element to comprehending the “Bernie” Madoff Scandal is understanding the concept of a ponzi scheme and how they are spotted on the markets. The operations of a ponzi scheme are complex and are reliant on the joint effort between multiple scam artists to be successful. Unlike common market schemes where a company or organization attempts to gather victims in mass for a large return, a ponzi scheme focuses solely on a small group or individual. The idea behind a ponzi scheme is to promise large returns to the small group of investors over a period of time. A key issue behind convincing a small group of investors to give up their money is proving that the investment and the return is legitimate and not fraud. So, during that time period that the scam company promised the return on investment, it needs to find another set of more investors to pay off the previous group with interest....
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...OF BERNIE MADOFF Bernadette Smith Business Law Professor Kopf 8/22/2010 Bernard Lawrence "Bernie" Madoff , born April 29, 1938 is an incarcerated former American 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. In March 2009, Madoff pleaded guilty to 11 federal crimes and admitted to turning his wealth management business into a massive Ponzi scheme that defrauded thousands of investors of billions of dollars. Madoff said he began the Ponzi scheme in the early 1990s. However, federal investigators believe the fraud began as early as the 1980s, and that the investment operation may never have been legitimate. The amount missing from client accounts, including fabricated gains, was almost $65 billion. The court-appointed trustee estimated actual losses to investors of $18 billion. On June 29, 2009, he was sentenced to 150 years in prison, the maximum allowed. Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest on December 11, 2008. The firm was one of the top market maker businesses on Wall Street, which bypassed "specialist" firms by directly executing orders over the counter from retail brokers. On December 10, 2008, Madoff's sons told authorities that their father had just confessed to them that the asset management arm of his firm was a massive Ponzi scheme, and...
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...Abstract This report allows the facts to be known concerning the still mysterious case of Bernard L. Madoff and his longtime investment securities activities, which eventually turned into an enormous fraud of incomparable size. In this report, you will begin to understand how Bernard Madoff was able to execute such an elaborate fraud. The illegal business behavior found in this case is too numerous to count however, quite a few will be identified. In addition, the roles of the perpetrators, accomplices, and their involvement in this scheme will be made known. This fraud had such an enormous impact on the victims, we will examine several implementations that the private investors could have implemented to protect themselves. An assessment of the perpetrators motives and the identity of some internal controls that could have deterred or prevented the fraud from occurring will be explored also. We will discover the action of the SEC and document how the fraud was discovered and investigated, including what should have been identified as “red flags”. And finally, a variety of legal actions arose when the Madoff fraud was uncovered, which is leading to more litigation currently and in the future. The Bernard Madoff’s Fraud Introduction Bernard L. Madoff was the mastermind and the admitted operator of the biggest Ponzi scheme in American History. His Ponzi scheme is considered to be the largest financial fraud in U.S. history. He stole millions maybe billions of...
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...Bernie Madoff has become known to many people as the man that perpetrated by far the largest scam in the history. His reputation of a successful investor, financial genius, and a chairman of NASDAQ took a turn for the worst when his so called split strike conversion strategy turned out to be nothing but a huge ponzi scheme affecting thousands of investors from around the globe. Although many financial advisors questioned his strategy and argued that it is virtually impossible to achieve, he managed to hide his scheme for many years. Why did Madoff got away with his fraud scheme for so many years? This is not a million dollar question as many would argue. The answer comes down to trust and greed. Investors trusted him because he had strong financial expertise and experience, he contributed substantial donations to various charities and foundations, investors were referred to him by friends and family, and he actively served on the board of directors of several high-profile companies. Greed was the other source of keeping Madoff away from getting his successful scam revealed. Investors were getting steady returns on their investments not annually, not quarterly but on a monthly basis. These returns were too good to be true but most of the investors were so happy with the profits they got from Madoff that they did not bother to further investigate and get a better understanding of his strategies. In essence, the way Madoff orchestrated his fraud scheme was by promising investors...
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...Bernie Madoff: An Issue of Ethics There are many ethical issues in the world’s news today, some bigger than others, and many that get swept under the rug. One particular ethical issue is at the core of a huge story that has dominated the news for months on end and has lead to more trying times on Wall Street. The story is about Bernie Madoff and the massive effect he and his ponzi scheme had on hundreds of people who trusted him. This paper will discuss the ethical issue underlying the conflict, the damage that resulted from it, and the leadership that acted to counter suit his disaster. Bernie Madoff’s ponzi scheme is sure to go down in history as one of the largest business scandals ever and should make every person stop and make sure there ethics are in check. Bernie Madoff exploited ethical theories much like a hawk swooping down to kill its prey. Bernie’s twisting of moral philosophy, virtue ethics, universalism and business ethics controlled both common and upper classes within predominately Jewish investors, prominent social groups, banks, successful foundations and charities. He wielded his genius in investments and securities tantalizing those who could not spot his cabal. Bernie’s acute cognizance of small investors and the ruling classe’s desire to believe in moral philosophic principles, rules, and values let to the contamination of right and wrong with financial deals earning him 50-65 billion dollars. Bernie literally earned the title of greatest Ponzi schemer...
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