Case 8: The Fraud of the Century: The Case of Bernard Madoff

Introduction

Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and the former non-executive chairman of the NASDAQ stock market. He is very successful in his early life. Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960 by buying and selling over-the- counter stocks that were not listed on the NYSE. As he became more successful, he moved the company’s headquarters from Wall Street to the famous “Lipstick Building” on Third Avenue. After that, Madoff started to help his investors to manage their money. He used Ponzi scheme to cheat his clients by promising of consistent returns of 10 to 12 percent. Base on his trustworthy and reputation, he success to find billions of dollars from hundreds of investors. Basically, Madoff just took money from new investors and uses it to pay off the old investors. Why he can make it because lots of investors lack financial knowledge. Also they won’t doubt about what the investment is as long as Madoff can make money for them. People didn’t know what is going on until Madoff can’t find any new investor to throw money in his schemes. After that, his schemes collapsed. In March 2009, Madoff pleaded guilty to 11 federal felonies and admitted to turning his wealth management business into a massive Ponzi scheme but he never indicated the involvement of any other company employees or his family members. After the investigation, investigators also found out his family also committed this fraud, Bernard’s son and his brother involve in his business, his wife does the social networking to attract celebrities to open account in his firm. On June 29, 2009, he was sentenced to 150 years in prison, the maximum allowed.
SWOT analysis
Strengths
* Investors didn’t know what Madoff did for