Bernard Madoff's Ponzi Scheme Essay

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Pages: 8

Bernard Madoff’s Ponzi Scheme

Successful millionaire, Wall Street celebrity and esteemed philanthropist who ran the largest Ponzi scheme turned in by his own children. Some of the laws he broke include: securities fraud, wire fraud, money laundering and mail fraud among others. As a result of his scheme and disregard for the law many people were affected and lost their savings and retirement plans. The consequence to his actions: life in prison and all of his belongings auctioned off by the U.S. government.
Bernard Madoff was born on April 29, 1938 in Queens, New York and raised in the Jewish faith. He is the son of Ralph and Sylvia Madoff. After he graduated from Far Rockaway High School in 1956, he attended the University of
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His firm’s annual returns were “curiously consistent”, around ten percent, and a crucial element in achieving fraud. Usually, Ponzi schemes pay returns of twenty percent or above and crash very fast. One of his funds described its strategy as pinpointing on S&P’s 100-stock index shares, which reported a ten and a half percent annual return during the preceding 17 years. The same fund reported earnings of a five point six percent increase, even at the end of November 2008, when the general market collapsed, while the same year-to-date total return on the S&P 500 stock index had been negative thirty eight percent.
Outside analysts expressed concerns regarding Madoff’s firm for many years. Harry Markopolos, a financial analyst and whistleblower, complained to the Securities and Exchange Commission’s Boston office in May of 1999 that they should investigate Madoff because it was not legally possible to make the profits he claimed using the investment strategy he claimed to use. Later, in 2005, Markopolos sent an elaborate 17-page memo to the Securities and Exchange Commission named: “The World’s Largest Hedge Fund is a Fraud”. In 2005, he also contacted the Wall Street Journal and revealed to them the existence of this Ponzi scheme, but the editors decided not to follow up on the story. His memo detailed twenty nine red flags.
Madoff’s Ponzi scheme began to unravel in December 2008 when the stock market continued to plunge. As a result of the