A Ponzi scheme originated

There ar plurality who decide to put extraneous their hard-earned n stars through gracement. Unfortunately, there are likewise those who communicate prefer of peoples putments to defraud others and make money for themselves. Bernard Madoff turn up to be donation of the latter, as he had recently become infamous for securities fraud. Bernard Madoff was ab initio revered as hero in paries Street. In 1960, he established Bernard L. Madoff enthronisation Securities with the money he had earned while on the job(p) as a lifeguard in Far Rockaway, Queens (Gandel).He proved to be a critical player in W whole Street, as his hearty provided the middle ground wherein buyers and sellers of stocks muckle meet. The firm also was prudent for the progress of Nasdaq, wherein Madoff was a stageer chairman. The New York Times reported that Bernard L. Madoff Investment Securities had under its centering over 24 notes, which was worth an estimated $17 one million million in assets. The set in tongue to cash in hand were sold to rich investors, institutions and hedge funds (Madoff). At impart, Madoff is considered the villain.On December 11, 2008, Madoff was arrested at his home in Manhattan on charges of what could maybe be the nigh extensive fraud in the history of Wall Street (Gandel). The 70 year-old former Nasdaq chairman defrauded his clients through a Ponzi plot which was originally said to have been worth $50 million. Later on, the court was estimated at $65 million. A Ponzi dodge originated as a form of a pyramid scheme named by and by Charles Ponzi, who tricked the citizens into a postage stump investment funds scheme in 1920s (U. S. dry).However, the Ponzi scheme at present works rather differently. People now operate on a rob-Peter-to-pay-Paul scheme, wherein they fuck off the money of new investors to pay what they owe to their old investors (U. S. dry). This is exactly what Madoff did with his firm. In the 1990s, Madoff used his re putation in the finance industry to construct an asset-management firm (Gandel). He utilized his social ne iirk to acquire money for his newly-established business. He would encourage people from the exclusive clubs wherein he and his relatives were included to invest in his firm.It was said that he had found an investor in the Palm coast Country Club who helped him find other investors (Gandel). Madoff was able to invite many a(prenominal) people to invest in his firm through a imprimatur of low payments but with high profits (Henriques and Kouwe 1). He managed the Fairfield Sentry fund, which was said to have $7. 3 meg in assets. Every year in its 15-year history, it was maintained that the firm paid over 11 percent engage (Henriques and Kouwe 1). Most of Madoffs investors contributed to his funds through several feeder funds (Gandel). In turn, these funds were promoted by other companies.The funds were associated with an investment management firm, which forwarded the money to Madoff. unmatchable of the funds which brought millions of dollars in Madoffs possession was the Tremont tolerant Market Fund (Gandel). It was in 2005 when what originally began as a legitimize business became a Ponzi scheme, as Madoff used the money of his new clients to win back the accounts of the earlier investors who wanted their cash back (Gandel). Despite the continued frugal decline in 2008, Madoff insisted to his clients that there was a 5. 6% growth in his funds by the latter part of November that year.This proved to be a false claim, as during the same expiration, the stocks of Standard & Poors cholecalciferol decreased by an average of 37. 7% (Gandel). For his fraudulent scheme to work, Madoff recruited people who had no previous training or experience to be part of his clerical staff (Madoff). He instructed these employees to produce false documents. It was these fraudulent papers which he provided to regulators. Madoff also knew that while his business was no longer running, he had to make it appear that his investment process was still working. He did this by constantly transferring millions of dollars from one bank to another.The bank transfers were also used to give the illusion that Madoff was actively making securities negotiations in Europe for his clients. In addition, he spent the funds of the firm for the personal use of relatives, associates and himself (Madoff). Madoffs ope symmetryn became increasingly questionable as it continued to give a systematically optimistic report closely its performance despite the dire economic situation. In addition, a senior executive at Madoffs firm also became suspicious when Madoff expressed his desire to give the annual bonuses of the employees two months earlier than intended (Henriques and Kouwe 1).Days prior to that incident, Madoff mentioned to a different senior executive that he was having difficulty raising money to pay the investors $7 billion worth of withdrawals. When he was c onfronted by the senior executive, Madoff finally told the truth. His firm was rattling bankrupt and it had been bankrupt for awhile. Madoff told his executives that while he planned to submit himself to the authorities, he first wished to give the remaining money to his family, friends and some employees (Henriques and Kouwe 2). He was not able to do as he planned, as he was in brief arrested.Madoff was charged with several federal offenses, including perjury, money laundering and securities fraud (Madoff). On certify 12, he pleaded guilty to all 11 felony counts, which could earn him a total of 150 years in prison (Madoff). Madoffs Ponzi scheme had a rather extensive scope. The consequences of his actions had negatively affected finance all over the world (Madoff). The scheme had caused problems with international institutions such as HSBC and BNP Paribas. The investors that wooly in Madoffs scam included prominent names in sports, entertainment and publishing.His clients incl uded Steven Spielberg, Eliot Spitzer, Elie Wiesel and Mortimer B. Zuckerman. Hedge fund manager R. Thierry Magon de la Villehuchet also lost $1. 4 billion to the scheme (Madoff). Due to the Madoff controversy, the U. S. SEC had been bombarded with criticism. The a la mode(p) Ponzi scheme by Madoff showed the committees inability to look after investments and safeguard the investors (Hutchinson). Prior to the scandal, the U. S. SEC claimed that they did not detect anything questionable about Madoffs business (Serwer). This would denote negligence on the part of the SEC.If the SEC itself cannot help investors, how do investors help themselves to neutralise becoming victims of such bulky fraud? Financial experts have several suggestions on how securities fraud can be prevented. Both Hutchinson and Serwer agree that one must not invest in something he or she does not understand. If a person is presented with an investment offer, that individual must thoroughly investigate about the s aid offer. One must ask as many questions as needed, and until he or she has completely understood the process (Hutchinson).If the person who made the offer cannot decently describe how he profits from the said investment, there is a initiative that the offer maybe dubious. If possible, try to get hold of the accounting ratio of the company. Ask a securities analyst to verify the numbers. Second, one must stick to the three rules of investment. According to Hutchinson, these are diversify, buy over an extended period and research well what you intend to buy. Diversifying is very important one must not invest all their money in one place. Lastly, experts are discouraging people from making investments in nameless enterprises (Serwer).People must avoid making investment transactions with people who claim to have connections (Hutchinson). If one plans to make an investment, he or she should seek competent and experienced investment specialists (Hutchinson). The story of Bernard Mad off is an unusual one. From one of Wall Streets most prominent personalities, he became one of the Americas most placeable criminals. The case of Madoff offers a lesson for everyone. In times wherein people will take advantage of other peoples investment, one must take the necessary precautions to avoid becoming a victim.Works Cited Bernard L. Madoff. The New York Times. 12 March 2009. 26 March 2009 . Gandel, S. Wall Streets Latest fall Madoff Charged with Fraud. Time. 12 Dec. 2008. Time Inc. 26 March 2009 . Henriques, Diana B. , and Zachery Kouwe. Prominent monger Accused of Defrauding Clients. The New York Times. 11 Dec. 2008. 26 March 2009 . Hutchinson, Martin. How to Avoid Madoff Mayhem. money Morning Web Site. Money Map Press. 26 March 2009 . Serwer, Andy. Madoff investors fire by SEC, too. CNN. com. 15 Dec. 2008. Fortune Magazine. 26 March 2009 . U. S. Securities and Exchange Commission. Ponzi Schemes. SEC Web Site. 19 April 2001 .