Bernard Madoff, Case Study 1 PDF

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Bernard Madoff 1. What are the ethical issues involved in the Madoff case? The Madoff case is the biggest scam scandal in this century. Bernie Madoff created an investment company, Bernard L. Madoff Investment Securities, LLC. In the beginning he conducted his business with honesty. Later, he started to run a Ponzi scheme. He was fabricating returns and issuing false statements. He created a pyramid where he was repaying old member with the money of new members. Those who invested with him were receiving solid and steady returns from 10% to 12% even in down markets (JMC RSA, 2017). Nevertheless, he was lying to his clients. Bernie sold to his investors the idea that he was combining blue chip securities with derivatives to hedge risk (Ibid). He claimed the strategies he was using were too complicated to be explained and understood. His clients did not question anything because they trusted Bernie and they were receiving enormous returns. Besides, he sold the illusion that his services were exclusive and that his investors were a part of something special and if they go out of his business they will not be able to come back (Ibid). The ethical issue here was that he lied to his investors. He sold the illusion that his clients’ funds were safe. He lied to them by making them believe that the origin of his earnings was a diversified portfolio when everything actually came from a pyramid that would be unsustainable at a certain point. 2. Do you believe that Bernard Madoff worked alone, or do you think he had help in creating and sustaining his Ponzi scheme? Would this represent a conflict of interest? I think there were family members involved. Whether they did it knowingly or unknowingly, they worked with Madoff to perpetuate the Ponzi

scheme. Madoff's sons, and his brother were charge of day to day operations at Madoff’s investment firm (JMC RSA, 2017). Madoff and his wife did the social networking to attract rich investors (Ibid). Besides, some other employees in Madoff’s Company were investigated (Ibid).

3. What should be done to help ensure that Ponzi schemes like this one do not happen in the future? If something sound too good to be true it is because it might not be true. I believe investors should be skeptical, check out the seller, verify if the investment is register, and understand the investments they are doing (Giorgianni, 2019). They need to ask for disclosure of information and financial statements so that they can track what it’s going on with their money. Besides, regulators should keep an eye on those who sell investment products promising high returns, they need to be scrutinized closely.

REFERENCES JMC SRA. (2017, May 11). Bernie Madoff - The Scamming Of America (FULL) Documentary [Video]. Retrieved from https://www.easybib.com/guides/citationguides/apa-format/youtube-video/ Giorgianni. A. (2019, June 25). 6 Ways to avoid an investment Ponzi scheme. Retrieved from https://www.investopedia.com/articles/investing/091115/6-ways-avoidinvestment-ponzi-scheme.asp...