Bernie Madoff began his career as an investment broker in 1960, where he legally bought and sold over-the-counter stocks not listed on the New York Stock Exchange (NYSE). From the 1960’s through the 1990’s, Madoff’s success and business grew substantially, mainly from a closed circle of known investors and friends through word of mouth. In the 1990’s Bernard L. Madoff Investment Securities traded up to 10 percent of the NASDAQ on any given day. With the success of the securities business, Madoff started an illegal money-management business, promising his investors consistent returns from 10-12 percent, unheard of returns at the time, which should have tipped off most investors that something was amiss.
Investors were so enveloped in the sense of exclusivity and high returns, that no one questioned Madoff or his strategy of buying stocks and trading options on these stocks, his way of limiting the potential loss. In 2008, as the changes in economy heightened, investors began requesting payouts to their investments and Madoff grew increasingly desperate for new funds. His strategy began to ravel and the truth of his actions began to spiral out of control. Bernie Madoff, once a legal investment broker, would be known to have committed the white-collar crime of all times, a Ponzi scheme. Similar to that of a pyramid scheme, a Ponzi scheme uses money from new investors to pay off the older investors. The term Ponzi scheme was developed with the first known con artist in such an attempt, Charles Ponzi, who in 1920 advertised that he could payout a 50% return on investments in only 45 days. As individuals throughout New Jersey and New England began investing, and sometimes mortgaging their house to do so, Ponzi was t...
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Rothfeld, M. (2010, Jul 26). The Wall Street Journal. Retrieved Dec 1, 2013, from “Madoff Investors Brace for Lawsuits”: http://online.wsj.com/news/articles/SB10001424052748704719104575389141620473502
Sandomir, R. &. (2012, Mar 19). THe New York Times. Retrieved Nov 25, 2013, from Mets’ Owners Agree to Settle Madoff Suit for $162 Million: http://www.nytimes.com/2012/03/20/sports/baseball/mets-owners-pay-162-million-to-settle-madoff-suit.html
Smith, A. (2011, Jan 13). CNNMoney. Retrieved 25 2013, Nov, from Madoff victims win $7.2 billion from Picower estate: http://money.cnn.com/2011/01/13/news/companies/madoff_picower_court/
U.S. Securities and Exchange Commission. (2012, Apr 2). The Securities and Exchange Commission. Retrieved Nov 30, 2013, from Post-Madoff Reforms: http://www.sec.gov/spotlight/secpostmadoffreforms.htm#revitalize
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