Bernard Madoff Ponzi Scheme Case - Essay Example

Comments (0) Cite this document
Bernard Madoff Ponzi Scheme Case Introduction Bernard Madoff operated what was considered to be one of the most successful investment strategies in the world, for more than seventeen years. His embezzlement of funds came to light in December 2008, as one of the most detrimental Ponzi schemes in history…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.3% of users find it useful
Bernard Madoff Ponzi Scheme Case
Read TextPreview

Extract of sample "Bernard Madoff Ponzi Scheme Case"

Download file to see previous pages The fraud caused investors to lose billions of dollars, and gave rise to a crisis of confidence in the capital markets. In reality, Madoff’s funds had no investment strategy to provide “hedges” against the usual forms of risk. For over a decade, there had not even been any trading of stock. In Madoff’s Ponzi scheme, the early investors were bought off with the money from the later investors; additionally, the payouts to the early investors were used as proof of profitability, to thereby convince later investors that the returns were legitimate. The bankruptcy trustee is implementing remedial measures including a “clawback” action for the later investors to recover the profits of the early investors. Thesis Statement: The purpose of this paper is to investigate the Bernard Madoff Ponzi Scheme Case, examine the reasons for the fraud to take place over several years, identify the warning red flags missed by the investors, and the preventive and recovery measures to be adopted in Ponzi cases, besides other related aspects. Bernard Madoff’s Ponzi Investment Scheme The investment operation of Bernard Madoff was exposed in December 2008 as an extensive Ponzi scheme. The term is derived from Charles Ponzi who organized such a scam in 1919, and it denotes a fraudulent investment arrangement in which investors give cash and property to the main individual in the arrangement. While misappropriating some or all of the funds, the investment operator reports to the investors that the funds made profits. These professed amounts, and those actually paid to earlier investors are funds received from later investors. The fraud is revealed usually when a large number of investors wish to withdraw their investments at the same time, particularly when there is insufficient in-flow of money from new investors. Thus, Bernard Madoff duped investors of an estimated amount of more than $50 billion, by the time the fraudulent scheme was uncovered (Mannino, 2010). Madoff’s alleged Ponzi had a reach across the globe of more than $50 billion. The sustained durability of the fraud for nearly two decades is considered to be due to Jewish money managers, severe regulatory shortcomings including ineptitude, and probable conflicts of interest by Federal Communications Commission (FCC), Securities and Exchange Commission (SEC), and other regulators and auditors. Madoff appears to have taken actions that reveal him as an equal opportunity thief, who unashamedly misappropriated funds from close relatives and charities in his scheme (Vinod, 2009). One of the main reasons for Madoff’s attracting a wide following was that he “delivered consistently high returns with very low volatility over a long period” (Bernard & Boyle, 2009, p.3). His technique to obtain these low risk returns was to use a split-strike conversion strategy. This requires taking a long position in equities together with a short call, and a long put on equity index to lower the volatility of the position. It was eventually revealed that these returns were false. The Madoff case raises obvious questions on why it was not discovered earlier, and the reasons for investors and regulators to miss the various red flags. The need for risk management and regulation through improved capital requirements for operational risk, is evident from the implications of ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Bernard Madoff Ponzi Scheme Case Essay Example | Topics and Well Written Essays - 1500 words”, n.d.)
Retrieved from
(Bernard Madoff Ponzi Scheme Case Essay Example | Topics and Well Written Essays - 1500 Words)
“Bernard Madoff Ponzi Scheme Case Essay Example | Topics and Well Written Essays - 1500 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Bernard Madoff Ponzi Scheme Case

Madoffs Ponzi Scheme

...Madoff’s Ponzi Scheme Overview Bernard Madoff devised a Ponzi scheme that took away near about 50 million dollars from his clients through his firm Madoff Investment Securities. Misusing his position in the society as a well-known financial adviser, he easily managed to run the Ponzi scheme evading the scrutiny and investigation of auditors and SEC. Later on, Harry Markopolos, an independent financial investigator developed serious doubts about the marketing strategies of Madoff due to the high returns he offered. In 2005, Markopolos reported to the SEC...
12 Pages(3000 words)Essay

Bernard Lawrence Bernie Madoff

...The illegal behavior associated with this scheme hurt thousands of investors worldwide. Bernard Madoff was running a Ponzi scheme which was advertised as a legitimate hedge fund investment. A Ponzi scheme can be defined as an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors (Sec, 2001). The first type of illegal behavior was fraud. Fraud is considered a violation of existing laws in the United States. The fraudulent activity of the company violated the Securities Act of 1933. The second type of illegal behavior was deception as the company was...
3 Pages(750 words)Assignment

Business: Bernard Madoff

.... Conclusion Bernard Madoff ruined his large investment firm into one of the largest Ponzi scheme in history. He was involved in several cases of fraud that ruined several investors’ lives. Later when the fraud was uncovered, Madoff was convicted for eleven accounts of unlawful activities and sentenced for 150 years. Madoff decisions in business were not ethical. He opted to ruin the lives of several investors for his own benefit. Madoff could have used other alternatives that were mainly established on moral principles. His involvement with the charities and non-profits caused excessive damages. There is...
5 Pages(1250 words)Essay

Bernie Madoff Scandal: The Kind of Ponzi Schemes

...? Bernie Madoff Scandal: "The Kind of Ponzi Schemes" Facts in the Bernie Madoff Scandal Firstly the Ponzi scheme carried on by Bernie Madoff made theinvestors counter a loss of around $65 billion. The second fact reflects that the returns gained by the initial investors of around 1 percent were rendered to them from the consecutive investments gained from other investors and not from returns. Thirdly the above condition ran from 1990 to 2008 after which the case of subprime crisis hit the investors resulting in the doldrums. Fourthly, Bernie Madoff in the light of gaining investments from...
5 Pages(1250 words)Case Study

The Madoff

...this particular truism, it has to be stated that the stakeholders who are separated either by psychological or physical distance often undermine the factor of ethical behaviour. In this case, the auditor of Bernard Madoff Investment Securities was Friehling and Horowitz. The company was located in a small 13 by 18 inches office in the area of Rockland County in New York and had only three employees. One of the employees was a secretary while the other employee lived in Florida (Benson, 22). The factor of audit though is now openly questioned played a major role in increasing the layer of fake authenticity for the Ponzi scheme pulled off by...
9 Pages(2250 words)Essay

Bernard Madoff Investment Securities Scandal

.../ Fraud, 2010). Born in 1938, former American stock broker, investment adviser, and non executive chairman of the NASDAQ, Bernard Madoff is believed to be one of the greatest frauds of all time. He was succeeded in cheating the public and the authorities for around 30 years using a Ponzi scheme. He was succeeded in adding one more new chapter to the fraud histories in the world. Anyone who is working in investment securities department in the world is now taking lessons from the innovative investment scandal anchored by Madoff. Madoff admitted that he has started his fraudulent activities in early in the 1990’s. However federal...
5 Pages(1250 words)Research Paper

Research for the Bernard Madoff Case

...Bernard Madoff Case Bernard Lawrence "Bernie" Madoff is the greatest frauds ever witnessed in American stock market history. He was succeeded in collecting as much as 50 billion U.S. Dollars by defrauding thousands of investors. The investors were unaware of the wrong motives of Madoff and invested heavily in the Ponzi scheme offered by Madoff’s company. Investors did not bother much about the capital when they got huge returns. Madoff was succeeded in cheating the public and the authorities for around 30 years and no investigating agencies were able to find out the...
3 Pages(750 words)Research Paper

Bernard Lawrence Bernie Madoff

...Madoff’s case, by using consistent and somewhat believable returns to investors he was able to maintain his practice for decades. The first charge levied against Madoff was a criminal charge of securities fraud. This is defined by encouraging investors to make investment decisions with false information that results in losses to the investor. This is the case with Ponzi schemes such as the one operated by Madoff, because investment returns are financed by later investors and estimated return information given to potential investors is fraudulent. This behavior is unethical and illegal because the investor doesn’t...
5 Pages(1250 words)Assignment

Ponzi Scheme of Bernard Madoff

...Analyzing the Madoff Case Summary of the Case Bernard Madoff created the world’s greatest Ponzi scheme. A Ponzi scheme’s system makes sure that it completely disintegrates after the discovery of the fraud. The fraudulent activities of Madoff fell down upon the constant streams of redemptions after the financial turmoil. However the disaster is that the Securities and Exchange Commission (SEC), on several instances, comprising many reliable pursuers, had chances to inspect and discover Madoff’s scheme. The most known and exposed prospect...
4 Pages(1000 words)Case Study

Is social security a ponzi scheme

...scheme in the history of United States is the ‘Madoff Ponzi Scheme’, run by former chairman of the NASDAQ, Bernard L. Madoff. The scheme lasted over three decades and transcended national boundaries. Madoff reportedly siphoned off $65 billion from the gullible public (Benson 2009). The Social Security has a much longer history and is much larger in size. Social Security isn’t an individual investment plan. It’s a plan backed by the government and is intended to provide predictable income to the most vulnerable sections of the society. The aforesaid discussion establishes that equating Social Security...
5 Pages(1250 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Bernard Madoff Ponzi Scheme Case for FREE!

Contact Us