Madoff the Mastermind
Kory VanSpeybroeck
AC 572
April 14, 2012
Bradley Trimble

Madoff the Mastermind
Bernard Madoff was a widely known investment broker who, for a long time, was able to swindle investors out of their money. He did this by implementing one of the largest Ponzi schemes in history. Discovering the exact details about who was involved, how heavily they were involved, and the extent of the losses incurred may yet take many years. The goal of this research is to attempt to explain how the fraud was executed by explaining various details involved in this Ponzi scheme. These details include how the fraud was executed, parties that were involved positively and negatively, motives of each party, controls that may have prevented or deterred the fraud, any SEC involvement, how the fraud was discovered, and the resolution of the case. It is best for cases like this to start at the top of the pyramid and work down through the pyramid.
To begin, one must understand a Ponzi scheme and how it works in order to determine how Madoff conducted his particular scheme. A Ponzi scheme is designed to steal money from investors by promising consistent or large returns that are secured by previous investor’s funds. About.com lists five key elements of this type of scheme consisting of the benefit, the setup, initial credibility, initial returns, and communicated success (Mofatt, 2012). The benefit is the promise of a return at above normal averages or more consistently than usual. The next element, the setup is a believable explanation of how these returns are achieved; either through inside information or from access to nonpublic avenues of investing. The third element, credibility, relates to the person conducting the scheme being believable, having outstanding character, spotless reputation, and trustworthy. And last, the communicated success element is