Bernard Madoff's Ponzi Scheme

Only available on StudyMode
  • Download(s) : 473
  • Published : October 4, 2010
Open Document
Text Preview
Bernard Madoff’s Ponzi Scheme

Successful millionaire, Wall Street celebrity and esteemed philanthropist who ran the largest Ponzi scheme turned in by his own children. Some of the laws he broke include: securities fraud, wire fraud, money laundering and mail fraud among others. As a result of his scheme and disregard for the law many people were affected and lost their savings and retirement plans. The consequence to his actions: life in prison and all of his belongings auctioned off by the U.S. government. Bernard Madoff was born on April 29, 1938 in Queens, New York and raised in the Jewish faith. He is the son of Ralph and Sylvia Madoff. After he graduated from Far Rockaway High School in 1956, he attended the University of Alabama and then transferred to and graduated from Hofstra College in 1960, with a degree in Political Science. He also attended Brooklyn Law School but did not continue. In 1959, he married his high school sweetheart, Ruth Alpern. Ruth graduated from Queens College and worked in the stock market in Manhattan. Later, she worked in her husband’s firm and founded the Madoff Charitable Foundation. Madoff lived in a ranch in Roslyn, New York through the 1970’s and after 1980 he bought an oceanfront residence in Montauk, NY. His primary residence was an apartment on Manhattan’s Upper East Side. He also owned a home in France and a mansion in Palm Beach, Florida. In addition, he owned a fifty five foot sportfishing yacht. Madoff was a prominent philanthropist who served on boards of nonprofit institutions, many of which trusted his firm with their funds. He also served as the Chairman of the Board of Directors of the Sy Syms School of Business at Yeshiva University and as Treasurer of its Board of Trustees. He was also on the Board of New York City Center, a member of New York City’s Cultural Institutions Group, and on the executive council of the Wall Street division of the UJA Foundation of New York, which did not invest funds with him due to a conflict of interest. In 1960, he founded the Wall Street firm Bernard L. Madoff Investment Securities LLC, and acted as chairman until his arrest on December 11, 2008. He started his firm as a penny stock trader with a capital of $5,000.00, equivalent to $35,000 in 2008. His business grew with the help of his father-in-law, Saul Alpern, who referred his friends and their families. Originally, the firm made markets, quoted bid and ask prices, via the National Quotation Bureau's Pink Sheets. To be able to compete on the stock exchange’s floor with firms that were members of the New York Stock Exchange, his company started using cutting edge technology to distribute its quotes. After a test run, the technology his company helped develop became the NASDAQ. Madoff’s firm acted as a third-market supplier which avoided exchange specialist firms, by directly dealing with over the counter order from retail brokers. His firm was also the “first prominent practitioner” of payment for order flow, which consists of the dealer paying a broker for the right to execute the customer’s order. Madoff Securities was considered the largest market maker at one point and in 2008 was ranked the sixth largest market maker on Wall Street. In addition, his firm had an investment management and advisory division, which became the focus of the fraud investigation. In 1991, Madoff and his wife began contributing to federal candidates, parties and committees. From 2005 through 2008 they contributed twenty five thousand dollars a year to the Democratic Senatorial Campaign Committee. The Democratic Senatorial Campaign Committee returned one hundred thousand dollars of the contributions received from Madoff to Irving Picard, the bankruptcy trustee that is overseeing all the claims. Senator Charles E. Schumer and Christopher J. Dodd also returned or donated funds received from Madoff to some of his victims. After his arrest, Madoff admitted that since the mid-1990's he stopped trading and...
tracking img