Bernie Madoff

Topics: Bernard Madoff, Ponzi scheme, U.S. Securities and Exchange Commission Pages: 3 (1197 words) Published: June 21, 2013
Bernie Madoff

Bernard (Bernie) Madoff committed this century’s largest Ponzi scheme to date. First we will define Ponzi Scheme – it is a fraudulent pyramid scheme where original investors are paid their gains out of new investors money so it would appear to old investor that the scheme (business) is producing an unusually large return (Albrecht, 2009). The Ponzi scheme that Madoff created and pulled off for years was quite intricate. In a standard pyramid scheme each victim unknowingly brings in more and more victims, where as a Ponzi scheme has a single entity (group or individual) to keep up with and organize the fraud. The operator of the Ponzi scheme then will take new money brought in from recent investors and pay off previous investors. For this to continue on there must be a constant influx of new investors so there must be someone working that angle on a regular basis. Eventually the group of new investors will run out because the funds dry up. In a lot of Ponzi schemes when they begin to run low on victims things seem to fall apart and investors loose it all. In some cases the perpetuator escapes the area with all the money he / she have scammed. When or if they are caught the perpetuator will have to face prosecution and / or repayment of all money to victims and possible jail / prison time or pay restitution to the government. In some cases there are assets seized to reimburse victims and pay restitution (Smith, 2011). Madoff committed this fraud by luring and convincing his victims that he would guarantee one a double digit return. He consistently provided a return by his endless supply of victims according to Madoff at one point you were the outcast if you did not invest with him. He convinced many high powered and big name people that no one out there could make you money like he could. During an economic crisis people are more apt to fall for a scheme because we all want and need to make money. Bernie Madoff told people what they wanted and...

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