Bernie Madoff Ponzi Scheme
Madoff and team had set up a flourishing Ponzi scheme. A Ponzi scheme “is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors, rather than any actual profit earned.” This type of investment strategy is doomed from the start because there is never a plan to completely recoup the investor’s money; however, to the investor it seems like a good investment because it promised a higher short-term return.
Madoff’s Ponzi scheme had been a well crafted game and each move including precise calculations. As the authorities began to investigate the scandal they found that individuals, institutional investors, and securities authorities had been involved. Madoff and team created a group of financial managers to work with potential investors to sell the fraud. This group was an uneducated and inexperienced staff that was tasked to “generate false and fraudulent documents” that were used to disguise these unethical business transactions. These documents including trade blotters and monthly account statements were created using historical stock data from the Internet. In order to appear to have a thriving business, Madoff’s team began
Citations: 1) Securities and Exchange Commission v. Frank DiPascali, Jr, http://www.sec.gov/litigation/complaints/2009/comp21174.pdf 2) Healy and Henriques, “Madoff Aide Reveals Ponzi Scheme,” The New York Times. August 11, 2009, http://www.nytimes.com/2009/08/12/business/12madoff.html 3) Nicholas Varchaver, “For Madoff’s Right Hand, Hearing Ends in Handcuffs,” Fortune/CNN Money. August 12, 2009 http://money.cnn.com/2009/08/12/news/madoff_dipascali.fortune/index.htm 4) Esposito, Chuchmach, and Ross, “Bernard Madoff’s Right Hand Man Pleads Guilty, Will Tell All,” ABC News Online. August 11, 2009, http://abcnews.go.com/Blotter/Madoff/story?id=8304447&page=1 5) “Bernie L. Madoff,” The New York Times. November 3, 2009, http://topics.nytimes.com/top/reference/timestopics/people/m/bernard_l_madoff/index.html?inline=nyt-per