...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 quoting...
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...A “Ponzi Scheme” is an investment fraud that involves the payment of alleged returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often seek new investors by showing potential in their company; they entice investors to invest funds in opportunities claimed to generate high returns with little or no risk. 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 legal investment activity. The system is destined to collapse because the earnings are less than the payments to investors. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases. The system eventually will collapse under its own weight. The scheme is named for Charles Ponzi, who became well known for his illegal techniques for using the Ponzi method in early 1920. He had emigrated from Italy to the United States in 1903. His operation took in so much money that it was the first to become known throughout the United States. His original scheme was in theory based on arbitraging international reply coupons for postage stamps, but soon diverted investors' money to support payments to earlier investors and Ponzi's personal wealth. At that time when the annual interest...
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...and as a lifeguard on the beaches of Long Island, Bernard Madoff founded “Bernard L. Madoff Investment Securities,” a “trading power” house that would become one of the largest independent trading operations in the securities industry (Washington, 2012). In the year 2000 his company ranked among the top trading and securities firms in the nation. By age 70, his name had become legendary; he was considered to be one of the most “influential spokesmen” on Wall Street. But on December 11, 2008, Bernard Madoff was arrested and charged “in a 20 year Ponzi scheme, which would come to be known as “the most infamous fraud in Wall Street history (Leonard, 2008; Washington, 2012).” Mr. Madoff pleaded guilty to all federal charges filed against him, which included the following: “11 felony counts, including securities fraud, money laundering and perjury (Washington, 2012).” Judge Denny Chin was in charge of the proceedings, and on June 29, 2009, Bernard Madoff, former chairman of the NASDAQ stock exchange, was sentenced to the maximum penalty of 150 years. This paper will seek to analyze this case in its multiple dimensions in order to identify all ethical issues and propose potential alternatives to the moral choices that Bernard Madoff made. Facts Bernard Lawrence Madoff was born April 29, 1938. He grew up in a small Jewish community in Queens, New York. At age 22, in 1960, he founded his own wealth management business, “Bernard L. Madoff Investment Securities.” He made his business out...
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...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...
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...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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...Bernie Madoff Andrea L. Nolt Strayer University Intro to Business Professor Karina Arzumanova August 21, 2011 Bernie Madoff 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. 1. Describe three types of illegal business behavior alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business. Madoff reportedly admitted to investigators that he had lost $50 billion of his investors' money, and pled guilty to 11 felony counts—securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the United States Securities and Exchange Commission (SEC), and theft from an employee benefit plan—on March 12, 2009. (Biography, 2011) Mail fraud includes any scheme that attempts to unlawfully obtain money or valuables in which the postal system is used at any point in the commission of a criminal offense. (Mail fraud, 2011) By using the postal system for any of his illegal activities, he was committing mail fraud. Mail fraud is protected by the United States Code. Madoff also admitted to money laundering. Money laundering...
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...with advances in technology, and some have 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...
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...Bernard Madoff and the 2008 Financial Crisis On December 11, 2008, the Securities and Exchange Commission (“SEC”) charged and arrested Bernard Madoff and his investment firm, Bernard L. Madoff Investment Securities LLC, with securities fraud for a multi-billion dollar Ponzi scheme. On March 12, 2009, Madoff pled guilty to an 11-count criminal complaint admitting to running an international Ponzi scheme and defrauding thousands of investors. The SEC defines a Ponzi scheme as an investment fund that involves the payment of purported returns to existing investors from funds contributed by new investors (SEC). In the 1920s, the originator of the Ponzi scheme, Charles Ponzi, conned thousands of New England residents into investing in a postage stamp speculation scheme. Ponzi promised his investors returns of 50% in 90 days, which, at the time, was exceptionally high considering the annual interest on bank accounts was only 5% (SEC). Unlike Ponzi, who targeted average people and was very open with his scam, Madoff was very private and targeted wealthy individuals promising them steady returns of 8 – 12% each year. Madoff was perceived as a successful Jewish investor in the financial community and his investment fund was considered as an exclusive membership club. The key to running an ongoing Ponzi scheme is an unlimited supply of new investors because without new incoming money the entire system would collapse. Unlike most Ponzi schemes, which usually fail due to a lack of new...
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...First Name Surname Instructor Course Date Recent Corporate Scandal Meltdowns - Bernard Madoff Bernard Madoff also known as Bernie is a previous Chairman of the NASDAQ stock exchange. Madoff founded an investment advisory firm called Ascot that later brought about the famous Ponzi scheme (Rhee 363). The project led to defrauding of many investors. The investors lost over $50 billion in the project over a period of around two decades. It all started in early December 2008 when there was the financial crisis in the United States (Vagts 684). Madoff was not in a position to honor the investors' requests for cash. He had to come out in the open and confess what he was doing. He had to admit to the Ponzi scheme and Wall Street together with other parts of the world was shocked (Hansen & Movahedi 368). There was massive investment fraud and many people fell victims even high profile investors. The financial community had a lot of respect for Madoff. The trust they had made some investors give their life savings to the scheme. Those who came to invest included charitable organization that got its funding from Steven Spielberg, Kevin Bacon, who is an actor, New York Mets owners, and others (Vagts 684). Madoff got investments from large banks and pension funds, for example, Royal Bank of Scotland, Banco Santander from Spain and many others. Many investors lost all they had in the scheme. After his tricks were exposed he pled guilty of securities fraud among others. He was then...
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...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 L. Madoff Investment...
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...17, 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...
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...The Fraud of the Century: The Case of Bernard Madoff The fraud perpetrated by Bernard Madoff which was discovered in December, 2008 is based upon a Ponzi scheme. Madoff took money from new investors to pay earnings for existing customers. The greater the payout to retiring and withdrawing customer, the more revenue or clients he would need to start and “investment relationship” with Madoff. The Ponzi scheme was named after Charles Ponzi who in the early 20th Century, saw a way to profit from international reply coupons. International reply coupons were a guarantee of return postage in response to an international letter. Charles Ponzi determined that he could make money, legally, by swapping out these coupons for more expensive postage stamps in countries where the stamps were of higher value. While making a significant profit with this system, Ponzi got the idea of enticing investors to provide him more capital to trade coupons for higher priced postage stamps. His promise to investors was a 50% profit in a few days. Touted as a financial wizard and the ‘Warren Buffet’ of his day, Ponzi lived outside Boston, he had a fairly opulent life bringing in as much as $250,000/day. Part of Ponzi’s success came from is personal charisma and ability to con even savvy investors. The promised payout was supported by the new investors anxious to take advantage of these robust returns because he appeared to create an image of power, trust, and responsibility. In July of 1920...
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...The Fraud of the Century: The Case of Bernard Madoff The fraud perpetrated by Bernard Madoff which was discovered in December, 2008 is based upon a Ponzi scheme. Madoff took money from new investors to pay earnings for existing customers. The greater the payout to retiring and withdrawing customer, the more revenue or clients he would need to start and “investment relationship” with Madoff. The Ponzi scheme was named after Charles Ponzi who in the early 20th Century, saw a way to profit from international reply coupons. International reply coupons were a guarantee of return postage in response to an international letter. Charles Ponzi determined that he could make money, legally, by swapping out these coupons for more expensive postage stamps in countries where the stamps were of higher value. While making a significant profit with this system, Ponzi got the idea of enticing investors to provide him more capital to trade coupons for higher priced postage stamps. His promise to investors was a 50% profit in a few days. Touted as a financial wizard and the ‘Warren Buffet’ of his day, Ponzi lived outside Boston, he had a fairly opulent life bringing in as much as $250,000/day. Part of Ponzi’s success came from is personal charisma and ability to con even savvy investors. The promised payout was supported by the new investors anxious to take advantage of these robust returns because he appeared to create an image of power, trust, and responsibility. In July of 1920...
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...Law I – LEG 100 Dr. Dorothy A. Sliben November 22, 2010 Bernard L. Madoff The $50 billion hedge fund scandal involving Bernard Lawrence “Bernie” Madoff is the largest fraudulent scam in U.S. history, to date. This giant financial Ponzi scheme created and implemented by Madoff targeted members of the Jewish community. Moreover, Madoff’s Ponzi scheme impacted upon people from all walks of life. The people involved entrusted him implicitly with large sums of money. The funds fraudulently absconded, regardless of age, whether family, friends, celebrities, or investors encompassed life savings, pensions, institutional endowments; charities, non-profit organizations and/or corporate status. Once again, an individual under the guise of a “so-called” legitimate corporation conducts egregious actions above and beyond the scope of the law. 1. Describe three types of illegal business behavior alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business. In the Complaint filed by the United States Department of Justice, Southern District of New York (The United States Department of Justice, 2008), United States v. Bernard L. Madoff, 09 Cr 213 (DC), the government alleged that: Madoff committed 11 counts of securities fraud, investment advisor fraud (wherein he allegedly misled his investors about the health of his firm, Bernard L. Madoff Investment Securities LLC), wire and mail fraud, money laundering...
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...Bernard Lawrence "Bernie" Madoff 1. Describe three types of illegal business behavior alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business. In March 2009, Madoff pleaded responsible to 11 federal crimes and confessed to turning his wealth management business into a massive Ponzi scheme that cheated thousands of investors of billions of dollars. Madoff said he started the Ponzi plan in the early 1990s. However, the federal investigators believe that the fraud began as early a 1970s and speculation process may never have been lawful. Investigators found out that there were others individuals occupied in the scheme. The U.S. Securities and Exchange Commission (SEC) came under fire for not examining Madoff more thoroughly; inquiries about his firm were lifted as early as 1999. There were some allegations and they are as follows: Monopolizing Trade, this was unlawful according to Sherman Antitrust Act (1890); possessing unfair performs and misleading acts in or affecting commerce, which was prohibited by Federal Trade Commission Act (1914); Fraudulent financial accounting was also unlawful according to Sarbanes-Oxley Act of 2002 2. Name three types of parties who were impacted by the actions of Mr. Madoff and describe how they were impacted. The U.S. Securities and Exchange Commission (SEC) examined Madoff in 1999 and 2000 about concerns that the firm was hiding its customers' orders from other traders...
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