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Ponzi scheme short summary
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On December 08, 2008, Bernie Madoff was arrested outside his apartment for being behind the largest financial scandal that the world has ever scene. Bernie Madoff, former NASDAQ chairman and founder of Bernard Madoff Investment Securities LLC, the company that was running a $64.8 billion Ponzi scheme for almost 20 years. The Wealth Management portion of Bernie Madoff’s firm was all one big lie; investigators estimated the firm had liabilities of $50 billion and $64.8 billion dollars of fraud amongst his 4,600 clients. On March 12, 2009, Madoff pled guilty to 11 federal felonies, landing himself a 150 – year sentence and a restitution of $7.2 billion. The traits of Madoff such as: lack of symphony for others, a great deal of knowledge, and …show more content…
Eventually Bernie’s parent’s brokerage firm was shut down by the SEC, due to failure to file reports, this was certainly a very shady introduction to the financing world. Madoff attended Hofstra University and graduated with a Bachelor of Arts in political science. Then in 1960 at the age of 22 Madoff went on to open Bernard L. Madoff Investment Securities LLC, a penny stock trading, he was able to finance this with $5,000 he raised by working as a life guard and installing sprinklers. Madoff eventually grew his firm into one of the largest firms on the NASDAQ, and introduced aa computer software that projected quotes at an incredible speed, giving him the advantage over competitive firms. This was a Madoff’s powerful introduction showing him as a very promising investment broker, helping him gain credibility to future clients willing to give their money to Madoff. The growth of Bernard L. Madoff Investment Securities LLC was very impressive and legitimate for the time being, by promising a growth of 10% a year everyone wanted a piece of this firm. Madoff was known to getting investors from country clubs, and making other elite relationships amongst the wealthy people of Long Island. Also to be investing with Madoff was portrayed as a very exclusive selection of people were even allowed to be …show more content…
The simplest red flag of them all was the old saying “if it seems too good to be true it probably is”, but how could someone argue that one of the largest investing corporations was a sham, it just seemed too big to fall. Some key red flags were Madoff’s Split-Strike Conversion, a technique to know what stock will increase due to the trades going through his company, this was a red flag because to fulfill the returns he was giving, the amount of options he would trade would be giant, and easily noticed. Another was the overall secrecy of Bernard L. Madoff Investment Securities LLC, Madoff demanded secrecy with all his clients and if they spoke about his company they would no longer be able to invest through him, this was a huge red flag because never has a legitimate company abided by these rules. A key player who brought Madoff down was Harry Markopolos, a financial analysist, and fraud investigator. He brought up many red flags to the SEC three times, in 2000, 2001, and 2005, but the SEC did nothing. The SEC basically ignored the fraud case that Markopolos presented to them. Until finally the SEC decided to take a look at Madoff in 2005, but only to see if Madoff was front running, and they declared him clean in 2006. The SEC had nothing even to do with the collapse of this vast Ponzi
In May 2002 the SIPC trustee filed a 255.3 million lawsuit against the Madoff family. Madoff company BLMIS ended on December 11 2008 when he was arrested for stealing his customer’s money. For more than 50 years Madoff s company money from people and on June 29th 2009 he pleaded guilty "to 11 counts Complaint and was sentenced as a hundred fifty years in prison"(Lewis, 2013
Madoff started the scheme by misleading his clients to think that he was an elite investor because he was on a vast amount of important boards. Many believed the scheme and invested billions of dollars with Madoffs company. He was able to achieve some of the scheming through running his investments through a different part of his business. This was a way for only him to see the investments and the financial reports behind the investments. Bernard Madoff involved people
...FO at the Houston airport. While Mr. Fastow's parents were undergoing a random search, he stopped to chat with Mr. Schwieger. "I never got an opportunity to explain the partnerships to you," he said, according to Mr. Schwieger. Mr. Schwieger replied, "With everything that has come to light, I probably wouldn't like the answer I would have gotten."
The Bernie Madoff Ponzi Scheme is a well-known case and is known as one of the biggest Ponzi scheme’s. In summary the scheme occurred for many reasons that I will some up into 3 points; A lack in competency by regulatory agencies, a lack of regulation, and finally a breach in ethics by Bernie Madoff himself. To explain further, the regulatory agencies like the lawyers and SEC are supposed to prevent schemes such as this one from happening but because they lacked the skills to correctly assess the situation, interpreting the number of tips they had received regarding scheme that had been filed, and to act on those in an efficient manner. One of the tips was made by Harry Markopolos in 2000, of who correctly predicted that Madoff was guilty of fraud. Even after this tip from Markopolos, Madoff was not arrested until 2009. Many family members were also a part of the fraud along with some non-family members such as Frank DiPascali and a team known as the 17th floor team, who helped Madoff carry out his fraud. The idea behind Madoff’s fraud was that he would produce false statements of their investments and when people wanted to pull out their investments, the money wasn’t actually there, which rightfully rose more than a few eyebrows and ultimately led to his arrest.
Bernard Madoff opened his firm in 1960. His business began to grow when his father-in-law Saul Alpern, who was an accountant, came to the firm. Because there were a lot of competitive firms at that time, Madoff decided to use innova...
“Fifty percent profit in forty-five days!” was the claim of Charles Ponzi. Ponzi was a purported financial wizard. In the summer of 1920, he ran an “investment company” in Boston. He claimed to reap great profits by trading postal reply coupons. Nonetheless, the investment scheme was a fraud. Ponzi was using investors' money to pay off earlier investors, while keeping some for himself. In the end, he had collected $9,500,000 from 10,000 investors.
Bernie Madoff is one of the greatest conmen in history. The Bernie Madoff scandal takes the gold as one of the top ponzi schemes in America. Madoff started the Wall Street firm, Bernard L. Madoff Investment Securities LLC, in 1960. Starting off as a penny stock trader with five thousand dollars, earned from his workings as a lifeguard and sprinkler installer, his firm began to grow with the support of his father-in-law, Saul Alpern, who helped by referring a group of close friends and family. Originally, his firm was marketed by the National Quotations Bureau’s Pink Sheets.
5. JPMorgan Chase was charged with two felony violations of the Bank Secrecy Act; (this act requires banks to alert authorities to suspicious activities) because of their relationship with Bernie Madoff. This scam is considered the largest investment scheme in history, $65 billion Ponzi scheme. The bank has agreed to pay $1.7 billion in forfeiture directed to the victims of Madoff’s scam.
Bernie Madoff, “a former American stock broker, investment advisor, non-executive chairman of the NASDAQ stock market, and the admitted operator of what has been described as the largest Ponzi scheme in the history of the world”. (Bernard Madoff, 2011, para. 1) Bernie was able to convince investors to give him large sums of money with the promise that they would received between eight percent to twelve percent return a year. Bernie ran a pyramid scheme where Bernie kept the large sums of money for himself, and then he used the new investors funds to pay off the o...
In September 2008, Federal agents swarmed the offices of Tom Petters uncovering a billion dollar Ponzi scheme. A similar case in dimension and scale of the well-known Bernie Madoff case is Tom Petters; the mastermind of a 3.7 billion, fourteen-year long deceit, the second largest Ponzi scheme in the United States. Similarly, Robert Allen Stanford, whose scheme emerged in February 2009 and is thought to have lasted ten years, involving the enormous sum of $8 billion, as well as S. Rothstein, who admitted to managing an approximate 1.2 billion dollars Ponzi scheme at the end of 2009. According to Maglich (2014) Ponzi schemes continue to thrive and leave a trail of financial destruction. “In the first six months of 2014, at least 37 Ponzi schemes were uncovered, with a total of more than $1 billion in potential losses” asserts Maglich (2014). Even though Ponzi schemes eventually collapse, Ponzi schemes remain
This case illustrated that there were real consequences to white collar crime. In addition to paying the fifty million dollar fine, he relinquished another fifty million dollars of his illegal trading profits. (He still had millions remaining, however, from his illegal gains.) His actual prison sentence was three years, yet he served only twenty-two months in the federal prison at Lompoc, California, which was known to have a “country-club” atmosphere.
Prior to 2000, Enron was an American energy, commodities and service international company. Enron claimed that revenue is more than 102 millions (Healy & Palepu 2003, p.6). Fortune named Enron “American most innovative company” for six consecutive years (Ehrenberg 2011, paragraph 3). That is the reason why Enron became an admired company before 2000. Unfortunately, most of the net income for the years 1997-2000 is overstated because of unethical accounting errors (Benston & Hartgraves 2002, p. 105). In the next paragraph, three main accounting issues will identify for what led to the fall of Enron.
150 Ponzi schemes collapsed in 2009 alone, resulting in more than $16 billion in losses to tens of thousands of investors. These victims confront the challenge of calculating their losses for recovery claims as well as tax purposes. Ponzi scheme investigations currently account for approximately 21% of the Securities and Exchange Commission’s (SEC’s) enforcement workload — up from 17% in 2008 and 9% in 2005
In 1995 The Bayou Hedge Fund Group, referred to as the fund, was founded by Samuel Israel III in Stamford, Connecticut with the intention to produce high returns for investors. Good intentions were not enough when the fund began to experience losses almost immediately and Mr. Israel resorted to fraudulent activities to keep the appearance of success alive. The resulting life of the fund was filled will illegal, fraudulent, and unethical activities that finally brought the fund to bankruptcy and landed Mr. Israel and some of his key associates in prison. The objective of this paper is to overview the history of the case and to highlight some of the major issues that should have alerted investors and other outside parties to the wrongdoings being perpetrated.
What is the possible meaning of the change in stock prices for Berkshire Hathaway and Scottish Power plc on the day of acquisition announcement? Specifically, what does the $2.55 billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp?