BE case #1
01/23/2014
‘Bernard Madoff’
Introduction
Everyone likes to make profit in this pierce competitive society rather than losing money. So if someone give an offer like I can guarantee a very safe return about 10~12 percent per year, no one will deny the offer. Also, if the word came from the most successful investor, everyone will want to just hand in their money to him more and more. That’s the reason why Bernard Madoff could make a loss of 64 billion till he get caught by the SEC because of the Bernard Madoff case, following consequences came along:
1. Thousands of direct victims
2. Suicides, depression, mistrust spread among investors and the market.
3. Families who invested 100% with Bernard Madoff are impoverished.
4. Millions of indirect victims: Since some of Bernard Madoff’s investors were charitable, medical and academic organization, they couldn’t offer scholarships, medical treatments to its beneficiary. (Markopolos, p.2)
In this case, Bernard Madoff, who was called magic touch as an investor, took new investor’s money and simply bring it to current investor without actual investment. It’s almost similar to pyramid scheme, since no one makes profit and they just simply take money from new clients. The problem is quite clear. That is just a fraud and it looks pretty ordinary way to cheat investors. However, there are several reasons why Bernard Madoff could fraud 64 billion scale Ponzi scheme.
First of all, as a owner of the company Bernard Madoff was highly respected, well-established and esteemed financial expert. His name was quite famous among financial district and that’s why people didn’t doubt about his constant 10~12 percent return. (Clark and McGrath, p.6) Second, he was also running a legitimate business. In that place, he helped to create Nasdaq, which is the first electronic stock exchange, and advised the SEC on electronic trading issues. He was also a large campaign contributor and a familiar of senior...