Summary Of Bernard Madoff's Ponzi Scheme

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Bernard Madoff took notes from the Ponzi scheme originator, Charles Ponzi, by creating an investment Ponzi scheme. At the start of his career, Madoff was a broker who legally purchased and sold non-listed stocks on the New York Stock Exchange, soon he and his brother developed a technology that aided them in the competitive investment industry. Madoff’s Ponzi scheme was a continuous process of acquiring new investors’ funds, to pay the old investors’ promised 10-15% return on investments; all the while the legal funds were achieved via sales commissions for profits. Madoff sought out well-known individuals as investors and was known to provide his services to the ‘elite’. The fraudulent activity was the manipulation of financials, failure to register as an investment firm with the SEC and repetitive fraudulent financial reporting that lead to the investigation and prosecution of Madoff and those involved in his Ponzi scheme. Madoff’s Ponzi scheme resulted in billions of dollars lost in investments. (Ferrell, Fraedrich & Ferrell, 2003).

Madoff’s employees consisted of family members, ‘feeders’ and inexperienced personnel; although Madoff took sole responsibility of the Ponzi scheme there were raised questions, which Madoff cooly evaded when presented to him.
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Some investors decided to sue the SEC for not upholding their responsibilities; furthermore, the Securities Investor Protection Group (SIPC) was enacted to compensate up to $500,000 per client for the theft in their business relationship with Madoff. The damage caused by Madoff’s Ponzi scheme is an example of the extent of white collar crime; Madoff’s clients, family and employees will live on with this tremendous loss. (Ferrell, et al

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