Bernie Madoff's Ponzi Scheme

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

Madoff was able to align himself with wealthy individuals, leaders involved in foundations, business entities, and government. This gave him unlimited access to different groups of investors. Among Madoff’s Ponzi scheme victims, it is easy to find wealthy individuals, charitable organizations, and its stakeholders, such as employees, communities, vendors, and even the government.

Bernard Madoff ran the worlds largest ponzi schemes; he lost investors approximately seventeen billion dollars in principle. The following report goes through the events in general from begging to end including a description of the fraud committed, the stakeholders involved and the consequences for them, the role of the auditors and finally the outcome for those held responsible for the ponzi scheme.

The SEC does bare responsibilities in the Madoff scheme. The SEC was responsible for conducting investigations to prevent financial fraud. However, Harry Markopoulos reported to the SEC there were 29 red flags that would prevent the scheme to continue. Nevertheless, the SE failed to properly investigate to stop the financial fraud led by Madoff. The SEC was also given several reports documenting the risk of fraud yet continued to ignore and failed to properly investigate a scheme that could have easily prevented in

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.

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

Bernie Madoff was a successful gentleman whose financial career spanned almost 50 years. Some of his achievements include serving as the chairman of the board of the NASDAQ stock exchange; a member of the Board of Directors on the Security Industry Association; and a former National Treasurer of the American Jewish Congress. (Hirt, Block, Danielsen 2011) His greatest achievement was starting and being the chairman of Bernard L. Madoff Investment Securities LLC in 1960. His investment group gave him wealth and notoriety among the financial elite of New York City and around the entire country. Many trusted him and accepted his

Over twenty new directives have taken place within the SEC. (The Securities and Exchange Commission Post-Madoff Reforms, 2011). A case like Madoff’s requires everyone to ask what could be done better to protect assets and investments.

In this case of Madoff, he started an investment scheme where people invested in the scheme and were promised returns which were higher at a short period of time. Due to the high returns within a short period, many people invested in the scheme where at first he paid them returns as expected but after a time, he diverted investor’s money to make payments to earlier investors and also to himself (McDermott, M. A. (1998). He later disappeared with the investor’s money before they even realized.

Due diligence is “A comprehensive appraisal of a business undertaken by a prospective buyer, especially to establish its assets and liabilities and evaluate its commercial potential.” (Oxford Dictionaries). Every investor and self-respecting business should do their homework before trusting any other business with their money. Fairfield Greenwich Group claimed a loss of $7 billion that has “vaporized” with Bernie Madoff (Blodget, H., April 1, 2009). The Fairfield Greenwich assured their e-clients that they did their due diligence by thoroughly researched Madoff by learning about their managers, operational practices, staff, and infrastructure. The group also said that they have higher standards and sorting process than any other average consulting firm (Blodget). However, FGG were also supposed to analyze Madoff’s trading records. Apparently, they did not do their proper due diligence because Madoff did not have trading records; thus, it was impossible to replicate and analyze those essential documents. In addition, FGG needed to at least, monitor his activities for a couple of months to see what kind of results he is getting. The group is being sued by Massachusetts regulators for not doing due diligence that they claimed they did, misleading their clients, and investing more than a half of their assets into Madoff’s firm (Henriques, D.B., April 1, 2009).

Bernie Madoff, owner and founder of “Madoff Investment Securities”, was known as a very trustworthy and nice person. He was also known as one of the top financial advisors in the industry, where you needed to be someone for you to be able to be his customer. The fact of his exclusivity and the remarkable returns caught investors’ attention across the globe. Because of this fame as being the best and most exclusive, Madoff was able to manage many extremely wealthy and powerful members of the elite class of investors. Which also meant Madoff would be managing billions of dollars every year that he could manipulate in any way he wanted. Madoff was able to manipulate these thousands of people and gave him the ability to create the largest

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

Bernie Madoff was a well known and a well-liked man on Wall Street. Madoff had an impeccable reputation, not only in the investment market, but socially, too: “Nasdaq made him its chairman; the Securities and Exchange Commission appointed him to industry panels; Madoff was even able to arrange with the Wilpon’s, owner of the New York Mets, for his staffers to play charity softball games on the field at Shea Stadium” (Bandler et al. 52). That is why the nation was stunned to learn that on December 11, 2008, Bernie Madoff was arrested on charges of theft of billions of dollars from his clients over the decades prior

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.

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