Ponzi Scheme Case Study

In December 2008 one of the biggest fraudulent schemes, better known as a Ponzi scheme was discovered and shocked the United States. The person whom committed this scheme was Bernard Madoff or Bernie as his friends called him. At that time he was a well- respected financier until he scheme his investors out of more than $65 million for over a decade (Yang, 2014). What is a Ponzi scheme? Let me explain. A Ponzi scheme works like a pyramid scheme. What Madoff was is take money from new investors to pay earnings for existing customers without actually investing the money (Ferrell, Fraedrich, & Ferrell, 2015). Ponzi schemes were name after a man name Charles Ponzi who in the 20th century saw a way to profit from international reply coupons,

This man was a man of charisma and had the ability to con every savvy investor. He was a trusted and well respected man, which had created an image of power, trust, and responsibility such as Bernard Madoff. Ponzi made money by swapping these coupons for expensive postage stamps in countries where the value was much higher (Ferrell, Fraedrich, & Ferrell, 2015). Ponzi convinced investors to provide him with money to trade these coupons for higher priced postage stamps, and promised the investors a 50 percent profit in just a few days. Ponzi himself brought in nearly $250,000 a day. His scheme was exposed in the Boston Pont in July of 1920. His office was raided and he was charged with mail fraud. According to the lesson most Ponzi schemes self-destruct very quickly as the ability to gain new investors dwindles (Ferrell, Fraedrich, &

The early success and competitive advantage me from Madoff working with his brother, whom after graduation from law school began working with Madoff at the company and developed great technology for trading, buying and selling at the best price. Madoff controlled funds in-house and made his money in this division from commissions on sale and profits. It was stated that the profits from is business was not based on fraud, but there is evidence that Madoff occasionally injected funds from his illegal business into his legal one during times of low revenues (Ferrell, Fraedrich, & Ferrell,