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Bernard L. Madoff: The Largest Accounting Fraud in History

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Through his business started in 1960, Bernard L. Madoff Investment Securities LLC hedge fund, he operated the largest Ponzi scheme that has ever been uncovered. In 2008, that scheme finally caught up with him. Depending on the source, the scheme has been estimated to be ripping investors off for approximately 40 years. Madoff convinced investors that they were investing in fund that promised high returns with low risk involved. In the end, Madoff had dug himself too big of a hole and couldn’t climb his way out.

In 2008, financial crisis struck the US which had investors becoming more conservative. Madoff could no longer support his Ponzi scheme. In order for his scheme to continue to function, the system needs a continuous flow of new investors to support the previous investors and provide them with “gains”.

“Redemption requests for $7 billion, by investors looking to pull back from turbulent stockmarkets, forced Mr Madoff to admit that his coffers were empty—bearing out Warren Buffett's adage that only when the tide goes out is it clear who was swimming naked.” (The Economist 2008)

Madoff allegedly cheated about 8,000 investors in his scheme of somewhere between $15 billion and $65 billion. The exact figure varies with the source. He operated over a span of 40 years, paying off those who sought to cash out with funds secured from new clients, and he sent regular statements to investors detailing their holdings and their illusory high level of profits. (Geis 2013)

There were many red flags whom which Harry Markopolos made obvious to the SEC. Although, the red flags were true and apparently obvious the SEC continued to ignore Harry’s claims for several years. Some of the red flags Markopolos identifies include; Split-Stri...

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2.) Coenen, Tracy. "Fraud Files: With Madoff, There Were Many Red Flags." DailyFinance.com. N.p., 13 Apr. 2010. Web. 20 Feb. 2014. Available at: http://www.dailyfinance.com/2010/04/13/fraud-files-with-madoff-there-were-many-red-flags/

3.) "Ponzi Scheme." Investopedia. N.p., n.d. Web. 09 Feb. 2014. Available at: http://www.investopedia.com/terms/p/ponzischeme.asp

4.) "Ponzi Squared." The Economist. The Economist Newspaper, 15 Dec. 2008. Web. 15 Feb. 2014. Available at: http://www.economist.com/node/12795543

5.) Geis, Gilbert, PH.D. "Unaccountable External Auditors." Fraud. N.p., Mar.-Apr. 2013. Web. 20 Feb. 2014. Available at: http://www.fraud-magazine.com/article.aspx?id=4294977160
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