Bernie Badoff Case: The Case Of Bernie Madoff

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

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

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