Professor Demetrius Abraham
Business Law I-Leg100
Bernard Lawrence “Bernie Madoff” was a former stock broker, investment advisor and non-executive chairman of National Association of Securities Dealers Automated Quotations (NASDAQ) stock market. Madoff is the operator of the world’s largest Ponzi scheme in history. The Ponzi scheme “is a fraudulent investment operation that pays returns to separate investors, not from any actual profit earned by the organization, but from their own money or money paid by subsequent investors” ( The Ponzi Scheme). After pleading guilty to eleven federal felonies, Madoff admitted to federal investigators that he turned his wealth management business into a massive Ponzi scheme that defrauded thousands of investors of billions of dollars. Some of the felonies Madoff was guilty for were securities fraud, investment advisor fraud, and mail fraud.
Describe three types of illegal business alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business. One of the three types of illegal business alleged against Madoff was lack of transparency. “Denial of access to reasonable records, and aggressive behavior toward those who seek access, constitute a compelling indicator of fraud. Mr. Madoff's hedge fund was not registered with the SEC until late 2006, and the firm's auditor was an accounting firm owned by his brother-in-law. He openly resisted outside audits, ostensibly protecting his proprietary trading strategy” (Uncovering Business Fraud: Look Beyond Pronouncements and Acts). The second type of illegal business alleged against Madoff was unrealistic performance. An example of unrealistic performance is within a company when a salesperson always meets their quota exactly. “One of Mr. Madoff's hedge funds designed to invest in the S&P 100 claimed to increase in 2008 by 5.6 percent during a...