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Bernard Madoff Fraud Essay

3467 words - 14 pages

Abstract

This report allows the facts to be known concerning the still mysterious case of Bernard L. Madoff and his longtime investment securities activities, which eventually turned into an enormous fraud of incomparable size. In this report, you will begin to understand how Bernard Madoff was able to execute such an elaborate fraud. The illegal business behavior found in this case is too numerous to count however, quite a few will be identified. In addition, the roles of the perpetrators, accomplices, and their involvement in this scheme will be made known. This fraud had such an enormous impact on the victims, we will examine several implementations that the private investors ...view middle of the document...

(NBC, 2009) (“Bernard Madoff Fraud,” 2012)
Bernard Madoff managed and controlled his ponzi scheme by using an Investment Securities Limited Liability Company he founded in 1960. He was chairman of this company and continued to operate his scheme until he was discovered in 2008. The fraud concerning Bernard Madoff was and still is the being covered by the media and it is suspected that the United States Securities and Exchange Commission (SEC) was notified and made aware on more than one occasion about this matter but they chose to ignore the information given to them. Perhaps there are more charges that can be filed, although Madoff’s numerous offenses may already be enough to keep him in prison for the rest of his life. (Markopolos, 2010) (“Bernard Madoff Fraud,” 2012)
How Madoff Executed the Fraud
Madoff’s scheme to defraud his clients at Bernard Lawrence Madoff Investment Securities (BLMIS) began as early as 1980 and lasted until its exposure in 2008. Bernard carried out this scheme by soliciting billions of dollars under false pretenses, failing to invest investors’ funds as promised, and misappropriating and converting investors’ funds to benefit Madoff, himself, and others without the knowledge or authority of the investors. To execute the scheme, Madoff solicited and caused others to solicit potential clients to open trading accounts with Bernard Lawrence Madoff Investment Securities (BLMIS) on the basis of a promise from him. He promised to use investor funds to purchase shares of common stock, options and other securities of large, well-known corporations, and representations that he would accomplish high rates of return for client, with limited risk. (“United states of,” 2009)
Among other things, MADOFF marketed to clients and prospective clients an investment strategy referred to as a "split strike conversion" strategy. Clients were promised that Bernard Lawrence Madoff Investment Securities (BLMIS) would invest their funds in a basket of approximately 35-50 common stocks within the Standard & Poor's 100 Index (the "S&P l00"), a collection of the 100 largest publicly traded companies in terms of their market capitalization. MADOFF claimed that he would select a basket of stocks that would closely mimic the price movements of the S&P 100. MADOFF further claimed that he would opportunistically time those purchases, and would be "out of the market intermittently, investing clients' funds in these periods in United States Government issued securities such as United States Treasury bills. MADOFF also claimed that he would hedge the investments that he made in the basket of common stocks by using investor funds to buy and sell option contracts related to those stocks, thereby limiting potential losses caused by unpredictable changes in stock prices. (“United states of,” 2009)
Madoff’s Illegal Business Behaviors Exposure
Federal prosecutors filed a total of eleven charges against Bernard...

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