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What was the case about?

(Summary of the Case)

The case involving Bernard Madoff was one of the biggest Ponzi schemes of the century.
Originally Madoff was a stockbroker for NASDAQ and was to take his clients money and invest
it in the company as they had wished. He had promised the investors that if and when they want
to cash in on their investment they could at any time for the amount of money that it was
supposed to be that day; this meaning the original investment plus the additional profit that had
been acquired. It wasnt until later on that people had realized what happened. Madoff had been
taking the investors money and putting it directly into his Chase Manhattan Bank account. For
the most part he honored the requests of the people who wished to withdraw but it would be from
the money that he had added into the bank account, not the money that was seemingly invested
into his own company he had created called Bernard L. Madoff Investment Securities LLC. The
money did not only come from investor who had little money, it also involved those that were
large investors such as celebrities, big companies, and even charities.

Who was (were) the individual (s) and company (ies) involved?
Involved in the scam and also the main part of it was indeed Bernard Madoff himself.
Although he said that he had acted alone in the process, it seemed as though the scam was of
such a large magnitude that it was almost impossible that he could have acted alone. Madoff, as
previously mentioned, had taken sums of money from those that chose him to be their investor.
As he started small and only had $5,000 to begin with, he quickly built up his firm and ended up
serving as a chairman for multiple years. The people that he involved ended up being the people

that he genuinely left out to dry. The people he dealt with had large sums of money typically,
such as Steven Spielberg, Kevin Bacon and even the New York Mets owner.

When and where did it happen and amount of money involved?

Not until too recently was it discovered that there was a company that partially aided the
Ponzi scheme put into place by Madoff and that would be from a company called JP Morgan.
Apparently they had ignored evidence that clearly pointed out that the returns, on the later to be
called Ponzi scheme, were far too good to be true. However, regardless of them realizing this
they pretended they hadnt noticed a thing. Companies are to report any indifferences or odd
findings to the SEC and since they neglected to do so they were charged with a penalty of nearly
two billion dollars.

To this day, it is still unknown to the true beginning days of when the scheme began
occurring. Some have speculated that it has been going on since his first days in office on Wall
Street, when he worked for NASDAQ; however, some say that it began when he created a firm
of his own to where it was easier to continue on with his scam. Madoff himself has been quite
contradictory in regards to this information as well. In different interviews he tended to say
different dates, thus leading to an inconclusive date. It has been said in many different places by
numerous people that he had stolen $65 billion from people throughout the days of his scheme. It
was technically only $20 billion dollars as opposed to $65 billion. The amount of money that

was initially invested totaled to $20 billion but with the amount of returns that had been
accumulated on the investment it created a total net worth of $65 billion.

Why did it happen?

The reason behind Bernard L. Madoff committing his crimes is again, unknown, just as
the exact date to when he had started to commit these crimes is still unknown. It can be inferred
that he had wanted to make as much money as possible out of greed. Whether it was to benefit
himself and then eventually his family, some may never know, but as for now it safe to speculate
that he did it due to his need to be avaricious. One other theory has been thrown around and put
out and that is that the reason he did commit such crimes was because he wanted to be able to
please the most amount of people as possible. Logically thinking, having people invest money in
him and having them get outrageous amounts of money back would most certainly please
anybody. Even though these people had no idea that a type of Ponzi scheme was happening right
under their noses, believing that someone (Bernard) had their best interest in mind made them
happy and greatly pleased them.

How did this case come to the attention of the media?

At the downturn of the economy it became hard for Madoff to keep up his scheme. He
did not have enough money to project the correct amount of returns that he should have been
showing and knew that at any time he would be caught. At a certain time every year Madoff
would cut his employees a bonus check, mainly those that were in his family that worked for

him. These bonus checks would end up totaling several millions of dollars. It wasnt until
Bernard Madoff decided to write out their bonus checks two months early that people within the
firm started to question the decision, demanding to know where this large sum of money was
coming from. He ended up admitting that a certain part of the firm was, in fact, a Ponzi scheme
that he had been having going on for a long period of time. It was Madoffs own sons that
worked with him at the firm that reported their father to the government. It was only a day later
that he was arrested on charges that included securities fraud, wire fraud, mail fraud, money
laundering, etc.

What was the outcome of the case?

The outcome of the entire case was that Bernard Madoff was arrested and charged on
one, single count on December 11th, 2008 to which he bailed out on $10 million. A few months
later, in March of 2009, Madoff pleaded guilty to eleven different charges, almost all of the on
different counts. Madoff was sentenced on June 29th, 2009 to serve 150 years in prison and after
that the company began to have lawsuits filed against them. It was mainly Madoffs family that
got the extent of the suing, with a lawsuit against them in the amount of $199 million. His family
took the effects of this case extremely hard to where it became almost too much to handle for
some. Mark Madoff, Bernards son, could simply not take the media coverage and shame that his
father had brought to the family, as well as the bad name that it had created for him and ended up
committing suicide on the 2nd anniversary of day his father had been arrested. Investors in

Madoffs firm have slowly gotten their money back but even to this day only half of the victims
have been paid off, $9.8 billion dollars have been recovered thus far.

How could this case been avoided?

Quite honestly, there are many ways that this case could have been avoided, although it
largely is in part to Bernie. Had he not created a separate branch of his business to launder
money into and had he not even concocted this scheme in the first place it could have all been
avoided. It could have also been avoided if his firm workers had kept a closer eye on the
financial statements and looked for anything out of the ordinary. It may have been somewhat
difficult to spot but at some point someone must have started to see that something seemed a bit
off. The investors should have also been able to talk to Madoff and see where exactly their
investments were headed and get a full count of how much money to date they have

What can we learn from this case?

From this case, many have learned that they cannot necessarily fully trust any one
investor. People have realized that a third-party is not always going to give their due diligence
and that they should ask for a second or third opinion before falling into any type of investment.
It is also shown and learned that the government needs to dig deeper into files and history to
attempt to get a full disclosure on a company. Had the government looked further into the files,
after investigating, they would have had enough evidence to raise a red flag and possibly cause a

full internal investigation. However, the SEC often took Madoffs word for things and didnt
push the issue.

Citations Page
Clark, Josh, and Jane McGrath. "Bernard Madoff's Ponzi Scheme - HowStuffWorks."
HowStuffWorks. Web. 24 Nov. 2014. <http://money.howstuffworks.com/ponzi-scheme5.htm>.
"Bernard Madoff Fast Facts." CNN. Cable News Network, 1 Jan. 1970. Web. 24 Nov.
2014. <http://www.cnn.com/2013/03/11/us/bernard-madoff-fast-facts/>.
Rushe, Dominic. "JP Morgan Chase to Pay More than $2bn in Penalties for Madoff Ties."
The Guardian. 7 Jan. 2014. Web. 24 Nov. 2014.
Smith, Aaron. "Five Things You Didn't Know about Bernie Madoff's Epic Scam."
CNNMoney. Cable News Network, 10 Dec. 2013. Web. 24 Nov. 2014.
"Bernard Lawrence Madoff." Bio. A&E Television Networks, 2014. Web. 23 Nov. 2014.
Stoffel, Brian. "You're Wrong About Madoff, and That Ignorance Will Hurt You." You're
Wrong About Madoff, and That Ignorance Will Hurt You. 27 Apr. 2012. Web. 24 Nov. 2014.
Schmidt, Michael. "How To Avoid Falling Prey To The Next Madoff Scam."
Investopedia. Web. 24 Nov. 2014. <http://www.investopedia.com/articles/fundamentalanalysis/09/investing-due-diligence.asp>.