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essays about ponzi-schemes
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1. Charles Ponzi was a working-class Italian immigrant who was eager to find success in America. Bernard Madoff was already a multimillionaire before he started his scheme. Does that make one more unethical than the other? Why or why not?
No I don’t believe it does make one more unethical then the other. Yes, Charles Ponzi was opportunistic trying to make his way in America while Madoff was a Wall Street financial fixture well aware of the risks he was taking. Charles Ponzi and Bernard Madoff both made unethical decisions regardless of where the intent originated. The pair lied to their investors; the stakeholders of their organization, in all sense of the word as there were no true business operations occurring. I believe they justified their unethical behavior with the belief “that the activity is safe because it will never be found out or publicized” (Ghillyer).
2. Explain how a Ponzi scheme works.
A Ponzi scheme is a type of investment fraud that offers high returns on original investments, with payment being received from new investors. The profits paid out are entirely from “new investors in the absence of any real business operation to generate profits” (Ghillyer). In essence a person is approached to invest in some opportunity that promises a high return on the original investment. As new investments come in being sold on the same opportunity, funds continue to grow. Most individuals decide to reinvest profits as the return is so high. The industry doesn’t collapse until the scam is uncovered or too many investors decided to cash out and there is no money to pay out. The SEC states “In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the fa...
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...investment diversify to minimize risk.
Works Cited
Bandler, James. "How Bernie Did It." CNNMoney. Cable News Network, 30 Apr. 2009. Web.
01 Mar. 2014.
Ghillyer, Andrew. Business Ethics Now. New York, NY: McGraw-Hill, 2012. N. pag. Print.
Moyer, Liz. "Why The SEC Missed Madoff." Forbes. Forbes Magazine, 17 Dec. 2008. Web.
01 Mar. 2014.
Nocera, Joe. "Madoff Victims, Get Over It." Executive Suite Blogs. NY York Times, 29 June
2009. Web. 22 Feb. 2014.
"Ponzi Schemes." "Ponzi" Schemes. U.S. Securities and Exchange Commission, 9 Oct. 2013.
Web. 02 Mar. 2014
Schaefer, Steve. "Four Years After Madoff, One Big Lesson For Investors." Forbes. Forbes
Magazine, 28 Dec. 2012. Web. 02 Mar. 2014.
Turner, Russell B., and States United. Madoff Ponzi Scheme : SEC Failure And Why. New
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Unlike borrowing money to pay an outstanding debt, with a Ponzi scheme there is still a debt but it is owed to a different person and is larger. According to the SEC, the first Ponzi scheme ever was introduced by Charles Ponzi (Commission, 2013). Charles Ponzi is known to have deceived a large number of people into putting resources into a postage stamp scheme back in the 1920s. During an era when the yearly premium rate for financial balances was five percent, Ponzi guaranteed speculators that he could give a half return in only 90 days. Ponzi at first purchased a little number of worldwide mail coupons in backing of his plan, yet immediately changed to utilizing approaching trusts from new financial specialists to pay indicated comes back to before speculators (U.S Securities and Exchange,
The case that was provided in the Stanwick textbook provided information on the Madoff Ponzi scheme which is said to be the largest of Ponzi schemes in the world. This case was a very interesting case. It showed how Bernard Madoffs massive falsehood created disaster for around 13,600 clients. The impact from Madoff did not end with his clients being impacted but also people far and in between. Madoffs Ponzi scheme was controlled through his company that consisted of his family being the head of the company, friends, and employees. This scheme was a result for the recession that hit in 2008. The two sons of Madoff that were top employees claimed to have no connections with the Ponzi scheme.
...the man for whom the scheme is named. It was also the largest investment fraud by a single person. The most important effect of the Madoff scandal is the reformation that occurred in the SEC afterward amid shock at their inability to catch Madoff in the act during their investigation. The enforcement division was revamped to focus on more concerning markets and was more heavily staffed with market experts. The Office of Market Intelligence was created with the responsibility of managing tips. The SEC began to employ more undercover agents and advocate for a protection program for whistleblowers. Back-office personnel oversight was enacted. Additional funding was approved for the SEC. Surprise examinations were approved to ensure the existence of reported assets. In general, the regulating power of the SEC was vastly expanded to prevent similar crimes from occurring.
After having them signed as investors to his company, he would pay them very handsome returns and in gaining their trust, they would give him extremely positive feedback, which would eventually attract more investors. In addition, Madoff would capitalize on his business having this foresight of exclusivity. His promise to investors of a 10percent return annually was never openly questioned until 2001 and 2005. Articles and magazines were written, and the person in question was none other than Madoff himself. The SEC would request reports throughout the life cycle of his operation, but Madoff would escape their radar by instructing his employees to construct false trading records and monthly investor statements. Moreover, Madoff would also gain money from fees on investors through feeder funds, which are funds that combined money from other investors and were then transferred to a Madoff Securities account. Another reason Madoff escaped from the SEC is through his family. At some point in time, SEC boss Christopher Cox ran an internal investigation and found out that one of his own employees from the SEC, Eric Swanson, was in charge of monitoring Msdoff’s firm, who also happened to be married to Madoff’s niece. The last reason Madoff managed to hide his Ponzi scheme so well was due to his veteran
Middle use the money he was stealing for his personal luxurious lifestyle and also for his family and friends. Invest investigators describe Madoff con game like an inside man. In order to keep his con up he had to "work with others who would help him carry out his complex criminal activity and who he could trust not to betray him"(Lewis, 2013 p.289). He works his family members like his brother Peter who later committed suicide during the trial.
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.
In 1919, Charles “Get Rich Quick” Ponzi began redeeming coupons obtained overseas for between 100 to 300 percent profit. The investors in his plan were promised 40 percent profit on their investment within 3 months (Hagan, 2011). Word quickly spread about the money-making opportunity and Ponzi found himself with more investors than he could handle. He paid the early investors with money obtained from later investors, creating a situation that simply couldn’t be sustained.
Scannell, Kara (January 5, 2009). "Madoff Chasers Dug for Years, to No Avail". The Wall Street Journal.
Bernie Madoff is one of the greatest conman in history. The Bernie Madoff scandal takes the gold as one of the top ponzi scheme 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 referred a group of close friends and family. Originally, his firm made markets by the National Quotations Bureau’s Pink Sheets. However, in order to compete with the bigger firms that were trading on the New York Stock Exchange floor, his firm started to use very intelligent computer software that help distributed their quotes in second’s rater then minutes. This software later became the NASDAQ that we know today. In December of 2008 Bernard Madoff confessed that he had embezzling billions of dollars from investors. It is estimated to have lasted nearly two decades, and stolen approximately $64.8 billion. On December 11, 2008 he was arreste...
“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, “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...
Bernie Madoff, along with his wife, founded Bernard L. Madoff Investment Securities, LLC. The company “attracted investors through word-of-mouth and amassed an impressive client list” (Bernard Maddoff Biography, 2014, p. 1). The company was well-known for its 10% or more reliable returns (Bernard Madoff Biography, 2...
This particular kind of scheme has been around for a long time dating back the 1920's. They are fraudulent investment operations , operated by a person or an organization, they promise significantly high return rates to investors to draw them in. They are able to pays returns to investors from new capital paid to the operators by new investors, rather than from proceeds obtained by the operator. The scheme was named after Charles Ponzi , who became notorious for using the technique in 1920's. Ponzi's became the first scheme to be widely known across America despite other schemes being done before, because the staggering number of money and people he defrauded. Ponzi's original scheme was based on the arbitrage of international reply coupon however, he soon redirected investors' money to make payments to initial investors and himself. A wide variety of investment vehicles or strategies, usually legitimate, have become the basis of Ponzi schemes.For example, Hedge funds which can degenerate into ponzi schemes if they unexpectedly lose money or fail to properly earn the returns promised or expected by investors. The promoter might decide to fabricate fals...
In criminology there are numerous theories as to the causes of different types of crime. These theories are extremely important in the continuous debate of the ways in which crime should be managed and prevented. Many theories have surfaced over the years. These theories continue to be explored individually and in combination, as criminologists search for the best solutions in ultimately reducing types and levels of crime. These theories include rational choice theory, social learning theory, and biology amongst many others. In this case study strain theory will be used to describe the reasons behind the white collar crimes of Charles Ponzi.
An event that definitely can be seen as being unethical involves a twenty-three year old former Phoenix, Arizona Police Officer. While on-duty and in full uniform, Officer James Wren would make unreported traffic stops of suspected drug dealers and steal their drug money for personal use. These thefts occurred on at least two occasions dating back to 2008. However, during these traffic stops Officer Wren was not just looking to gain some petty cash. He would use an accomplice to set-up large deals, and then Wren would target these dealers to gain a substantial amount of money. Wren and his accomplice Avash Mardjaee would split the proceeds after each incident (3 Down). On the first deal, Wren earned himself $16,000 dollars, and on the second he made out with $20,000.