Bernard madoff

Bernard Madoff(Ponzi scheme) byAfzaan HakimRoll No:6

WHO IS BERNard Madoff?Born on April 29, 1938 in Queens, New York

Graduated from Hofstra university in 1960 with a Bachelor of Arts in political science

He used $5,000 earned from a lifeguarding job to found his investment company.

Madoff's son reported him for securities fraud and Madoff pleaded guilty to 11 felony counts.

In 2009, the 71-year-old was sentenced to 150 years in prison.

The sCAM SYSTEM-Ponzi schemeThe scheme is named after Charles Ponzi who became notorious for using the technique in 1920

Pyramidal swindle consists of one: to use the money of the new investors him to pay away from the old men.

The plot is discovered when there are no more clients

Company cannot pay benefits to old investors if there are no new clients

It is a typical fraud system that can span for a long time till the time the number of clients is growing.

HOW THE SCAM FUNCTIONED?

In 1960, created Madoff Investment Securities in order to attract investments of wealthy people.

Initially, the company invested the full amount of the investment and ensured between 10% and 12% of profit.

The business attracted investors through word-of-mouth and amassed an impressive client list including stars such as Steven Spielberg, Kevin Bacon and Kyra Sedgewick.

He was secretive about the firms business, and kept his financial statements closely guarded

Madoff's annual returns were "unusually consistent," around 10%, and were a key factor in perpetuating the fraud

Because of new clients, the old clients were earning profits regardless of the status of the markets.

Why did it work so well?Two main reasons:

Ensure a high yield, up to 12% annual in every investment

The high prestige of Madoff as an expert investor.

After being Chairman of the Board of Directors of the NASDAQ, one of the most popular in the world, gave him credibility. He recruited investors from the exclusive clubs that part, as the Palm Beach of Florida, and his reputation grew up in wealthy individuals to the international banking system.

How did it end?After the investor informed his sons that he planned to give out several million dollars in bonuses two months earlier than scheduled, they demanded to know where the money was coming from.

When Madoff realised the game was up, he tried to distribute his remaining $300 million as "bonuses" to his business associates and family members

Madoff then admitted that a branch of his firm was actually an elaborate Ponzi scheme.

Madoff's sons reported their father to federal authorities, and the next day Madoff was arrested and charged with securities fraud.Who was affected?banks and insurance companies.

Private Banking and funds.

Foundations and individuals.

Some categories were infected in the scam, primarily banks to invest the money of their clients in societies with great wealth.

End of the adventureBernard Madoff was arrested for one of the biggest fraud case in the history of U.S.A

Madoff admitted to investigators that he had lost $50 billion of his investors money

Pled guilty to 11 felony countssecurities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the United States Securities and Exchange Commission (SEC), and theft from an employee benefit planon March 12, 2009.

Prosecutors say $170 billion moved through the principal Madoff account over decades

He was sentenced to 150 years in prison on June 29, 2009the maximum possible prison sentence for the 71-year-old defendant.

As the scandal unfolds, it sheds a revealing light on the social connections and financial relations between institutions and moneymen, and the reckless and semi-criminal methods employed by some of the most prominent banks.

After effectsMadoff himself, now 76, is just at the start of serving his prison sentence, a sentence that would end in the year 2139.

J. Ezra Merkin ran one of the largest feeder funds for Madoffs investment operation faces continued litigation despite agreeing last year to pay more than $400 million to settle a suit by the New York attorney general.

Some other top Madoff feeders died before ever having to defend their actions

Madoffs brother Peter is serving a 10-year prison sentence for his role in perpetuating the scam.

Madoffs elder son, Mark, hanged himself in his SoHo apartment on the second anniversary of the revelation of his fathers crimes, in 2010.The end