Bernie Madoff's Ponzi Scheme Case Study

Bernie Madoff, a well-respected financier, conducted one of the most well-known Ponzi schemes. Madoff lured in investors by guaranteeing them unusual high returns. Over several decades, Madoff was able to scam and convince thousands of investors to hand over their savings with a false promise of consistent profits in return. He was eventually caught in December 2008 and was charged with 11 counts of fraud, money laundering, perjury, and theft (Yang). On June 29, 2009, he was sentenced to 150 years in federal prison to pay the consequences of running the largest fraudulent scheme in United States history (Berman & Knight). Madoff was able to hold on to his investors and fulfill his promise of consistent return of profits by using the money from new investors to pay off older investors. In doing this, although no profit is actually being made, it makes the operation seem profitable and legitimate. Madoff was pocketing the extra money, allowing him to make $65 …show more content…
Madoff only had approximately $200 million to offer them. The reason he was able to run this scheme for so long without being discovered was because he was a well-versed and active member of the financial industry. Madoff started his own market maker firm in 1960 and aided in the start-up of the Nasdaq stock market. He was a member on the board of National Association of Securities Dealers and also advised the Securities Exchange Commission (SEC) on trading securities. That being said, investors did not have a hard time taking Madoff’s word or question him. Investors were easy to trust and believe Madoff because he had been in the industry for almost 70 years so many felt that he knew what he was doing (Yang). Madoff knew exactly what he was doing when he conducted this Ponzi scheme. He knew that he had built himself a good reputation that allowed investors to trust him with little to no