Bernard Madoff's Ponzi Scheme

Bernard Madoff utilized funds from new investors to finance the earnings of existing customers in his financial scheme; a practice regarded as a Ponzi scheme (Ferrell, 2009). Charles Ponzi, the naming convention originator, used this same type effort with postage stamps and con savvy investors to increase the capital needed to trade. The core of a Ponzi scheme is the ability to acquire new investors; greater volume equates to greater earnings. The downfall is the majority falter quickly.
Bernard Madoff began his business legally by profits between the offer and sale price of stocks to investment firms (Ferrell, 2009). The early success capitalized on a technological advantage in trading for the best prices. He did not make the money from fees, but rather on commissions and it did not appear to be of a
Madoff identified the strategy of buying stocks and trading options simultaneously limited losses, otherwise known as a “split strike-conversion” (Ferrell, 2009). Successful implementation of this strategy would have overpowered the market, this should have been a flag, but he never followed through. Madoff simply shifted funds between firms. He also used intermediaries who profited by fees from their prestigious clientele. The secrecy of Madoff impacted the feeders and investors significantly.
The name of Bernie Madoff was not publicized to the investors, who thought the intermediaries were managing the affairs. The investments ranged from wealthy individual to banks, and included the feeder’s funds and charities as well. The losses attributed to the scheme are not fully calculated, but reach well into the billions of dollars. Many investors with other firms now place blame on the firms not conducting due diligence and are holding them accountable for the losses. Madoff distributed his final funds to the employees of the company prior to persecution (Ferrell,