Madoff

The Madoff Scandal

In December 2008, the world became intimately familiar with the term “Ponzi Scheme” and the man known as Bernard “Bernie” Madoff. The days, weeks and months that followed revealed just how dark and far reaching the evil doer and event went.

Who is this man and what exactly is a Ponzi scheme? How and why did this happen? What have we learned since this tragedy? This writing will dive into this subject matter and uncover the facts behind the family and business, the subsequent legal cases / outcome and life after the scandal including personal testimonials, Security and Exchange Committee (SEC) procedural changes and legal implementations resulting from the Madoff scandal.

The Ponzi Scheme

A Ponzi scheme is defined as an investment style fraud in which payments owed to investors in the form of returns are financed with the funds collected from new investors (Ponzi Schemes - Frequently Asked Questions). Furthermore, Instead of actually conducting any legitimate investing activities, the fraudster also uses investing funds from new investors to pay for personal luxuries. The leader of the scheme normally attracts new investors through a classic hook technique that illustrates fast growth of invested monies with little or no risk. Often times the investment or product the unsuspecting victim thinks they are contributing to doesn’t even exist in the first place. Obviously, such activity is highly illegal and punishable by fines and jail time in all 50 states and the Federal government.

The term “Ponzi” scheme comes from the first notorious person to ever get caught committing such an illegal act; Charles Ponzi, who in the 1920’s swindled thousands of north easterners in a postage stamp speculation investment scheme. He lured potential investors by promising a 50 percent return in three months at a time when traditional bank accounts were granting 5 percent annually. His elaborate illegal activity began when he actually purchased several...