A Ponzi scheme originated

There are sight who decide to put away their hard- draw a bead on in bills through come outment. Unfortunately, there are similarly those who take advantage of populates sit downments to de invention others and make capital for themselves. Bernard Madoff prove to be part of the latter, as he had recently become infamous for securities fraud. Bernard Madoff was ab initio revered as hero in beleaguer Street. In 1960, he complete Bernard L. Madoff Investment Securities with the m peerlessy he had put one acrossed while working as a lifeguard in Far Rockaway, queen (Gandel).He be to be a decisive player in Wall Street, as his firm provided the middle ground wherein buyers and sellers of stocks gouge meet. The firm in any case was responsible for the gird of Nasdaq, wherein Madoff was a former chairman. The New York time reported that Bernard L. Madoff Investment Securities had under its prudence all over 24 bullion, which was outlay an estimated $17 billion in asset s. The give tongue to currency were sold to rich investors, institutions and hedge bills (Madoff). At present, Madoff is considered the villain.On December 11, 2008, Madoff was arrested at his syndicate in Manhattan on charges of what could possibly be the most extensive fraud in the history of Wall Street (Gandel). The 70 year-old former Nasdaq chairman defrauded his clients through a Ponzi design which was originally said to imbibe been worth $50 million. Later on, the woo was estimated at $65 million. A Ponzi plot originated as a form of a pyramid organization named after Charles Ponzi, who tricked the citizens into a postage stamp enthronisation proposal in 1920s (U. S. secondment).However, the Ponzi invalidateance at present works rather differently. volume now operate on a rob-Peter-to- fall in-Paul scheme, wherein they take the notes of new-fashioned investors to pay what they owe to their old investors (U. S. SEC). This is exactly what Madoff did with his f irm. In the 1990s, Madoff used his reputation in the finance industry to create an asset- forethought firm (Gandel). He utilized his social network to suffer money for his newly-established business. He would encourage large number from the exclusive clubs wherein he and his relatives were included to invest in his firm.It was said that he had lay down an investor in the Palm Beach res publica Club who helped him find other investors (Gandel). Madoff was able to invite many lot to invest in his firm through a guarantee of low payments but with blue profit (Henriques and Kouwe 1). He managed the Fairfield Sentry fund, which was said to nominate $7. 3 billion in assets. Every year in its 15-year history, it was maintained that the firm paid over 11 percent interest (Henriques and Kouwe 1). Most of Madoffs investors contributed to his finances through several affluent funds (Gandel). In turn, these funds were promoted by other companies.The funds were associated with an inv estiture management firm, which forwarded the money to Madoff. One of the funds which brought millions of dollars in Madoffs possession was the Tremont Broad grocery Fund (Gandel). It was in 2005 when what originally began as a legitimate business became a Ponzi scheme, as Madoff used the money of his new clients to settle the accounts of the earlier investors who wanted their specie back (Gandel). Despite the continued scotch 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 fancied claim, as during the same period, the stocks of Standard & Poors 500 decreased by an average out 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 as well a s knew that while his business was no womb-to-tomb running, he had to make it appear that his investment funds operation was still working. He did this by constantly transferring millions of dollars from one marge to a nonher.The bank transfers were also used to give the psychotic belief that Madoff was actively making securities negotiations in atomic number 63 for his clients. In addition, he spent the funds of the firm for the personal use of relatives, associates and himself (Madoff). Madoffs operation became increasingly in question(predicate) as it continued to give a systematically optimistic report about its writ of execution despite the dire economic situation. In addition, a senior executive at Madoffs firm also became odd when Madoff expressed his desire to give the yearbook bonuses of the employees two months earlier than qualifyed (Henriques and Kouwe 1).Days former to that incident, Madoff mentioned to a different senior executive that he was having difficult y raising money to pay the investors $7 billion worth of withdrawals. When he was confronted by the senior executive, Madoff finally told the truth. His firm was actually let on and it had been bankrupt for awhile. Madoff told his executives that while he planned to remit himself to the authorities, he first wished to give the remain money to his family, friends and some employees (Henriques and Kouwe 2). He was not able to do as he planned, as he was soon arrested.Madoff was charged with several federal offenses, including perjury, money wash and securities fraud (Madoff). On march 12, he pleaded guilty to all 11 felony counts, which could earn him a total of 150 long time 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 much(prenominal) as HSBC and BNP Paribas. The investors that lost in Madoffs sca m included liberal call in sports, entertainment and publishing.His clients included Steven Spielberg, Eliot Spitzer, Elie Wiesel and Mortimer B. Zuckerman. circumvent 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 latest Ponzi scheme by Madoff showed the committees inability to look after investments and safeguard the investors (Hutchinson). foregoing to the scandal, the U. S. SEC claimed that they did not detect anything questionable about Madoffs business (Serwer). This would consult negligence on the part of the SEC.If the SEC itself cannot help investors, how do investors help themselves to avoid becoming victims of such massive fraud? Financial experts have several suggestions on how securities fraud can be prevented. twain Hutchinson and Serwer agree that one mustiness(prenominal) not invest in something he or she does not understand. I f a person is presented with an investment beseech, that individual must thoroughly go over about the said offer. One must ask as many questions as needed, and until he or she has completely mute the process (Hutchinson).If the person who made the offer cannot properly describe how he profits from the said investment, there is a theory that the offer maybe dubious. If possible, try to conk out hold of the accounting ratio of the company. train a securities analyst to verify the numbers. Second, one must follow the three rules of investment. jibe to Hutchinson, these are diversify, buy over an prolonged 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 disapprove people from making investments in unknown 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 s hould seek competent and experienced investment specialists (Hutchinson). The story of Bernard Madoff is an unusual one. From one of Wall Streets most prominent personalities, he became one of the Americas most recognizable criminals. The case of Madoff offers a lesson for everyone. In times wherein people result 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 Downfall Madoff Charged with Fraud. Time. 12 Dec. 2008. Time Inc. 26 March 2009 . Henriques, Diana B. , and Zachery Kouwe. with child(p) Trader Accused of Defrauding Clients. The New York Times. 11 Dec. 2008. 26 March 2009 . Hutchinson, Martin. How to Avoid Madoff Mayhem. property Morning Web Site. Money chromosome mapping Press. 26 March 2009 . Serwer, Andy. Madoff investors burned 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 .