Why the fraud case was created
Bernie Madoff had his investors believe that they were making a lot of money through his investment firm (Bernard Madoff Securities), by creating false trade reports. His firm used a computer program that his employees used to backdate trades and manipulate account statements by entering in a false closing trade in the amount of the required profit for each of his customers. He also set up his portfolios to look like he was matching the returns of the S&P 500. He generated a return of more than 15% per year for his clients and was able to justify it by pointing out that the S&P 500 index generated an average return of 16.3% in the same period of time. He had people believe that he wasn’t doing anything “special” since he was matching that amount of gain. Bernie Madoff stopped actively trading after the year 1992. Instead, he deposited his clients’ money into his own personal Chase account. When his clients wanted to withdraw from their account, he would use the money that belonged to them or other clients to pay them their requested funds. Since his investors were a specific elite group, he was able to remain under the radar and keep the SEC off his back.
What would have prevented this fraud from being committed
If Bernie Madoff did not deceive his clients with false reports and false promises, this fraud would have never happened. The fraud could have been prevented from going on for so long if the SEC investigated him when they were advised to in 1999. A financial analyst informed the SEC that it was mathematically and legally impossible for Madoff to achieve the kind of returns that he claimed he...