Bernie Madoff's $50 Billion Ponzi Scheme
Who is Bernie Madoff
The Madoff investment scandal is the Ponzi scheme that former NASDAQ chairman Bernard Madoff confessed to in 2008. On March 12, 2009, Madoff pled guilty to 11 federal crimes and admitted to operating what has been called the largest investor fraud ever committed by an individual. On June 29, 2009, he was sentenced to 150 years in prison with restitution of $170 billion. According to the original federal charges, Madoff said that his firm had "liabilities of approximately US$50 billion. This is the world largest scandal. Bernie Madoff will go down in American history along side of Billy the Kid, Jessie James, and Butch Cassidy.
Bernie Madoff is serving a 150 year sentence in federal prison because he orchestrated a multi-billion dollar Ponzi scheme that swindled money from thousands of investors. He did not follow the crowd when he went about his operation. In most other Ponzi schemes the head of the operation promises a large short term gain. In the case of Madoff he made up phony statements that showed small to moderate, but consistent returns even in a bad market.
Madoff was a highly respected member of the securities industry all throughout his career. He was head of the NASD, a member of its board of governors, and chairmen of its New York region. Madoff’s was also a NASDAQ Stock Market’s board of governors and sat as chairmen for its executive committee and trading committee. He has also been in business since 1960. The hedge fund worked by taking money from investor’s not just big fat-cat billionaires and celebrities but also humbled investors, banks and even charities. Unfortunately they all lost money in this investment. In a fund that is ran to regulation a trader would take the funds intended for investment and play them in the market after research is performed in the hope for a gain on return. But what Mr. Madoff did was, he took the money held on to it. And never put it into the market. He would take money from new investors and pay off dividends form old investments. He would pay high profile clients up to 46% on return. Not only were is phony numbers attractive but Mr. Madoff was a charming man who people look up to like a super hero for little kids. One potential investor said that he had reached out to Madoff in hope that he could invest with his firm but was turned down after Madoff said he would only deal with individuals who had 20 million or more to invest with. He also went on to say that his friends called him a fool for waiting so long to get in touch with this financial god and now they are the fools.
But on the flip side of this story Madoff was one of the highest volume traders on a day to day basis in the market, he was called the third market with over 9% of daily trade activity on the NYSE. On average he was bringing in returns in the high single digits’ to at most 15% with his numerous legal companies. He would issue his clients phony statements with a comfortable return on their investment.
With this method he attracted people from all over the world just handing their hard earned money easily over to a person in the markets eyes at the time to be the most trusted, well respected man in the business. Madoff stayed under the radar and would have continues doing so if it wasn’t for the bad economy. AN article from the New York Times stated that “ the truth began to emerge as investors decided to pull out their money. Madoff told an employee clients wanted $7 billion in redemptions, court papers state. He was struggling to get it.” So in a time where majority of the world was in a down economy one single man just so happen to steal and then loose $50 billion dollars.
When pressure was weighing down Madoff he himself confessed of what he has been doing for a livelihood over the past decades. Flat out lying. And not in a small way. When news broke of what had happened investors wanted their money back, hoping the...
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