...JP MORGAN & CHASE CO. TURNS BLIND EYE TO PONZI SCHEME: MORAL HAZARD PROBLEM Banks have been at the forefront of the financial system for as long as they have existed and have captured the attention of stakeholders on both controversial grounds as well as being undisputed with regards to the many helpful services they provide. JP Morgan & Chase is one such bank, surrounded by hostile news articles and excessive scrutiny but rightfully so as it has of recent been the topic of much controversy as turning a blind eye to the moral codes established by the Securities and Exchange Commission (SEC) and assisting Ponzi Scheme masterminds in swindling unsuspecting investors. On January 7th, 2014, JP Morgan was accused of assisting its high profile client of two decades, Bernard Madoff, a mastermind ponzi schemer in executing his goal of duping investors into parting with their savings worth a whopping $17.3billion of which included pension funds that belonged to JPM shareholders. The bank was fined a penalty of close to $2billion stemming from two felony violations of the Bank Secrecy Act, which is a federal law that requires banks to alert authorities to suspicious activity. The bank was further required to pay $543million in resolving private claims over losses tied to the scheme. A reported $9.5billion has been recovered whilst almost $4.9billion has been returned to investors. It can be agreed that this by far does not compensate for the losses the investors incurred. The...
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...Bernard (Bernie) Madoff will be infamously remembered as the mastermind of the largest white collar crime in history. Investigators believe he perpetuated a 30 year, $65 billion fraud by leveraging his credibility as a Wall Street insider to deceive investors, financial institutions, accountants, friends, family, and government agencies (Ferrell, 2009). Therefore, victims, investigators, industry insiders, and observers have been left to ponder, how could Madoff dupe and deceive so many people for so long? In order to answer that question, Madoff’s history on Wall Street must be examined. Madoff began his time on Wall Street in 1960 by processing stock trades for large investment firms and institutional investors. After years of dutifully,...
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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 Fraud Case Bernie Madoff Fraud Case Introduction One of the largest fraud cases of all times is that of the “Bernard Madoff Case.” According to Armstrong (2008), “for a number of years Madoff managed to lure billions of dollars away from huge charities, as well as wealthy individuals in both the United States and Europe by getting them to invest in his hedge fund. This he did by offering extraordinary returns to investors, until his scheme eventually reached a staggering $50 billion under “management.” Within this paper, efforts will be made answer a number of questions, including how was this fraud executed; who were the perpetrators, accomplices and victims; how was the fraud discovered; what were some of the possible red flags; and what role did the SEC play in discovering the fraud. In addition to this, mention will be made of how the case was resolved and what are some of the measures that could have deterred or prevented the fraud from occurring in the first place. Given these harsh economic times which we live in, all efforts have to be made to enforce strict rules and regulations within financial institutions – so that investors and other stakeholders’ interests are protected. Had there been closer attention given by the Securities Exchange Commission and other regulators to the ‘red Flags’ associated with Madoff and his firm, then so many persons would not have lost billions. Bernard Madoff Investment Securities (BMIS) Founded in 1960...
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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...
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