A Ponzi scheme is a scam that involves payment of returns to initial investors and the perpetrators of the scam from funds contributed by new investors (Parton, 1969). New investors are often solicited by the organizers of the Ponzi scheme with promises of high returns and little to no risk (U.S. Securities and Exchange Commission [USSEC], n.d.). The culprit in many Ponzi schemes center their attentions on attracting new money to make promised payments to initial investors and themselves, instead of engaging in any legitimate investment activity (USSEC, n.d.). What is recognized as the biggest Ponzi schemes in history can be attributed to fraudulent business activities of Bernard Lawrence “Bernie” Madoff.
Bernard Lawrence “Bernie” Madoff is a former stock broker, investment advisor, and non-executive chairman of the NASDAQ stock market. In 1960 Mr. Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC and was chairman until his arrest on December 11, 2008 (“The Madoff Case,” 2009).
Describe three types of illegal business behavior alleged against Mr. Madoff and for each type of behavior, explain how the behavior is illegal or unethical in the conduct of business.
Securities fraud, money laundering, and perjury are just a few of the many allegations against Mr. Madoff. Mr. Madoff provided his investors with fictitious financial information in an attempt to gain their trust and money. Mr. Madoff knowingly accepted illegally earned funds for the purpose of investing the money in his company to make it appear that the money was legitimate. When financial questions aroused about investments procedures, Mr. Madoff lied not only in written statements to the U.S. Securities and Exchange Commission (SEC) but also under sworn testimony.
Securities fraud is a violation of the security laws. Sometimes referred to as stock fraud and investment fraud, securities fraud occurs when investors are encouraged to make purchase or sale decisions...
