Bernard Madoff Case

Bernard Madoff Case

Thesis Statement

The case of Bernard L. Madoff will remain etched in the memory of investors and traders for the unparalleled example of Ponzi scheme that it set and as the most financially-devastating crime.

Introduction

Bernard Madoff; also known as Bernie Madoff, was involved in 'Ponzi Scheme' which is predominantly a financial scam. Ponzi scheme is characterized by investment operations where returns are paid to the investors by their own money or from that of other investors. Earnings are usually low because so as to entice investors, higher returns are used thereby inducing lower income for the owner. This lower income prompts the owner into paying returns to investors from other investors' money rather than the profit. Bernard Madoff is former chairman of NASDAQ and known Wall Street trader owning securities firm by his name, Bernard L. Madoff Investment Securities LLC (BLMIS). It is through the investment management and advisory department of this firm through which he undertook one of the major financial scams and operated so since 1990 until his indictment. A successful investor and former stock broker, Madoff founded BLMIS in 1960 and continued to be the chairman of the firm until his arrest in the December of 2008.

Discussion

When the investigation was conducted, it was found out that Madoff operated his business using the 'Ponzi Scheme' since the early 1990's. He was expected by the clients of BMIS to invest their money in the securities market, but what Madoff rather did was that he deposited his clients' money into the Chase Manhattan Bank. It continued to become the biggest financial scam in the history of the United States impacting investors greatly. The fraud that triggered the loss amounting to more than $18 billion was confessed by Madoff and thus made public on December 8th, 2008.

Bernard L. Madoff Investment Securities LLC was one of the topline investment houses operating on the Wall Street of USA. It was basically involved in dealing with the clients of the retail brokers directly, cutting out the intermediary Specialist firms from the supply chain. He used to attract the investors gaining high returns from BMIS to his legal firm, so that they may funnel their profits into it as an investment. He had this legal firm established for money laundering activities so as to avoid any investigation into his securities investment firm by SEC. An investigation by Securities and Exchange Commission into the firm could be triggered by the unusual returns and profit that BMIS is disbursing to its clients as it generally raises suspicions about financial scams and illegal activities.

Madoff was accompanied by his family in increasing the client base of his business with his brother and son actively involved in the business operations. His wife was involved in social networking to make contacts with elites and celebrities. To establish significant relationship with them so as to have them register and invest into BMIS for their investment activities.

The scam is basically designed on the principle that the owner of the ...