The Ponzi Scheme (Bernard Madoff)

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e)The Ponzi Schem(

Bernard Madoff

First Semester - 2012

Contents:

Name of the company…………………………………………………………2

Field of the company…………………………………………………...…..2

The Ethical dilemma or issue, which faced the company………………..2

The Consequences of ethical dilemma……………………………....….…3

-Economical consequences………………………………………....……3

- Social consequences……………………………………………..……..3

- Political consequences………………………………………….….…...4

The solution or the end of the ethical dilemma…………………….....….5

-Largest stake-holders……………………………….……….…….……5 -Incarceration…………………………………….…………..…….…….6 References………………………………………..………………...…....…7 Student Names…………………………………..…………………………8

Name of the company:

Ponzi scheme

bernard madoff scandal

The Field of Company:

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.

The Ethical dilemma or issue, which faced the company:

Bernie Madoff had a really good reputation in the market that he was able to use unethically turning his wealthy management investment company to a huge Ponzi scheme defrauding his investors with over $65 billion dollars for at least 2 decades by promising his potential investors a high return on their investments with low risks, but rather than paying high returns to his clients he paid steady returns.

Bernie was also able to fool his own employees he gave them the idea that he was trading as a principal; making trades out of his on inventory that was kept hidden overseas he was able to do things that he cannot do acting as an agent, he would proclaim that he had achieved financial success with deals overseas giving the impression that his trading is somehow backed up.

Concerns about Madoff's business surfaced as early as 1999, when the financial analyst Harry Markopolos informed the U.S. Securities and Exchange Commission (SEC) that he believed it was legally and mathematically impossible to achieve the gains Madoff claimed to deliver.

The Consequences of ethical dilemma:

* Economical consequences

Investigators have determined others were involved in the scheme. The U.S. Securities and Exchange Commission (SEC) has also come under fire for not investigating Madoff more thoroughly; questions about his firm had been raised as early as 1999. Madoff's business, in the process of liquidation, was one of the top market makers on Wall Streetand in 2008, the sixth-largest.

Madoff's personal and business asset freeze has created a chain reaction throughout the world's business and philanthropic community, forcing many organizations to at least temporarily close, including theRobert I. Lappin Charitable Foundation, the Picower Foundation, and the JEHT Foundation.

* Social consequences

While many of Madoff's clients were institutional investors, some of his victims were smaller investors, including charities, pension funds and individuals whom he knew socially and who had placed their nest eggs with him. Austin Capital Management, which managed funds on behalf of the Massachusetts state pension fund, has lost $12 million, and the Chase Family Foundation, which donates $12.5 million annually to charities, will be forced to close as all its money was invested with Madoff.

*Political consequences

In the wake of the Bernie Madoff investment scandal and other financial scandals, regulatory changes are on the horizon for investment advisors,...
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