The Business Case Study: The Madoff Affair

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The Madoff Affair 1. A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. 2. A mutual fund or other fund that invests exclusively in another fund. Shares of the feeder fund represent shares in the second fund (called a master fund), which, in turn, represent shares in the underlying securities. Feeder funds are relatively common when the master fund contains tax disadvantages for shareholders that the feeder fund remedies. 3. Fairfield Greenwich made their money from investing. It is customary for a feeder fund to keep all client fees because they are investing into the fund so the fund should keep the fees. The fee arrangement caused a chain reaction with those who owned the…show more content…
Greenwich did not do any “due diligence” which is the reason for getting sued because they did not check and that’s how Madoff was able to get away with the scheme. Greenwich should have seen that he was using his own money while he was pocketing the money from investors and they could have stopped him. 8. The SEC did not act upon the information by Markopolos because Madoff had a good reputation at the SEC and had many connections with the people within the SEC, so they didn’t even bother conducting an investigation. 9. The Wall Street Journal did not publish the evidence by Markopolos because then people would take it out on them because they did not do the investigation and its because of them they lost there money. 10. I feel that the SEC did not do their job because they should have at least see these transactions and they should have caught him before everyone lost their money. Just because Madoff had good connections with the SEC they still have done some sort of an investigation and at least say they did not see anything than just ignore it because now people are mad at the

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