BERNIE MADOFF’S PONZI SCHEME

Abstract
Bernard Lawrence "Bernie" Madoff was an American financer who perpetrated the world's
largest Ponzi scheme, stealing tens of billions of dollars from thousands of investors over the
course of at least 17 years. In 2009, at the age of 71, he was sentenced to 150 years in prison and
forced to forfeit $170 billion. Also, he pleaded guilty to 11 federal felony counts, including
securities fraud, wire fraud, mail fraud, perjury, and money laundering.

Statement of the Problem: What is Ponzi Scheme and How does it Work?

Despite claiming to create large and consistent profits through a trading strategy known as
split-strike conversion, Madoff simply transferred client funds into a single bank account and
used it to reimburse current clients who wanted to cash out. The Ponzi scheme is a type of
investment fraud in which monies gathered from new investors are used to pay current investors.
Organizers of Ponzi schemes frequently offer to invest your funds and earn high returns with
little or no risk. However, the fraudsters in many Ponzi schemes do not invest the money.
Instead, they utilize it to compensate previous investors, with the possibility of keeping part for
themselves. That is why Ponzi Scheme became a symbol of the culture of greed and dishonesty
that, to critics, pervaded Wall Street in the run-up to the financial crisis.

How was the Issue Addressed?

Madoff was sentenced to 150 years in prison and forced to forfeit $170 billion in 2009. His
three homes and yacht were auctioned off by the U.S. Marshals. He resided at the Butner Federal
Correctional Institution in North Carolina, where he was prisoner No. 61727-054.

Recommendation

You should trust your instincts and never ignore red flags if there is any. Do not be afraid to
rely on your instincts if you are worried about the investment. If something seems weird, discard
it and walk away. Also, do not invest in anything that you have no knowledge about. Make a
research first before you invest. You have to answer questions such as what is the basis of this
investment? What are the risks involved? If you can answer these questions, do not invest. Do
not risk your money or capital.

Conclusion

Although Madoff was pleaded guilty in 2009 and will spend the rest of his life in prison, it
will not change the fact that thousands of investors lost their life savings and multiple tales detail
the harrowing sense of loss victims had experienced. In order to be able to return their funds,
Madoff Victim Fund (MVF) was created to help them compensate those who are defrauded by
Madoff. In November 2018, they were able to pay 27,300 victims an aggregate recovery of
56.65% of their losses with thousands more to be recover in the future.