Acc 562 Assignment One: Madoff Securities Essay

1322 WordsMay 18, 20156 Pages
Madoff Securities Bernie Madoff is very well known for running the “biggest fraudulent scheme in US history”. Madoff and his wife founded their own investment company, Bernard L. Madoff Securities, LLC by using the $5,000 dollars that Madoff had saved from a summer lifeguarding job. Very quickly, the firm had an impressive client list that included people such as Steven Spielburg, Kevin Bacon, and Kyra Sedgewick. The company grew famous for having the reputation of receiving reliable annual returns of 10 percent or more. By the 1980’s, Madoff Securities handled five percent of the trading on the New York Stock Exchange. As the business grew, Madoff began to offer jobs to various family members. His brother became the chief compliance officer in 1970. Madoff’s sons eventually began working for the company as traders. Madoff’s niece became a rules compliance lawyer for the trading division of the company. In December of 2008, Madoff announced to his sons that he would be giving out several million dollars in bonuses. His sons inquired as to where the money was coming from. Madoff admitted to his sons that one branch of Madoff Securities was an elaborate Ponzi scheme. His sons turned him in and he was arrested the next day. Madoff eventually admitted that he has lost $50 billion of his investors’ money. He then plead guilty to 11 felony charges. He was sentenced to 150 years in prison. Some people may question how this scheme was able to go on for so long with nobody catching on. Ponzi schemes are very elaborate schemes. According to Business Insider, “Ponzi schemes are run by a central operator, who uses the money from new, incoming investors to pay off the promised returns to older ones. This makes the operation seem profitable and legitimate, even though no actual profit is being made. Meanwhile, the person behind the scheme pockets the extra money or uses it

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