Bernie Madoff Essay
The Bernard Madoff’s Fraud
How Madoff Executed the Fraud
Madoff’s scheme to defraud his clients at Bernard Lawrence Madoff Investment Securities began as early as 1980 and lasted until its exposure in 2008. Bernard carried out this scheme by soliciting billions of dollars under false pretenses, failing to invest investors’ funds as promised, and misappropriating and converting investors’ funds to benefit Madoff, himself, and others without the knowledge or authority of the investors. To execute the scheme, Madoff solicited and caused others to solicit potential clients to open trading accounts with Bernard Lawrence Madoff Investment Securities (BLMIS) on the basis of a promise from him. He promised to use investor funds to purchase shares of common stock, options and other securities of large, well-known corporations, and representations that he would accomplish high rates of return for client, with limited risk. (“United states of,” 2009) Among other things, Mandoff marketed to clients and prospective clients an investment strategy referred to as a "split strike conversion" strategy. Clients were promised that Bernard Lawrence Madoff Investment Securities (BLMIS) would invest their funds in a basket of approximately 35-50 common stocks within the Standard & Poor's 100 Index (the "S&P l00"), a collection of the 100 largest publicly traded companies in terms of their market capitalization. Mandoff claimed that he would select a basket of stocks that would closely mimic the price movements of the S&P 100. Mandoff further claimed that he would opportunistically time those purchases, and would be "out of the market intermittently, investing clients' funds in these periods in United States Government issued securities such as United States Treasury bills. Madoff also claimed that he would hedge the investments that he made in the basket of common stocks by using investor funds to buy and sell option contracts related to those stocks, thereby
How Madoff Executed the Fraud
Madoff’s scheme to defraud his clients at Bernard Lawrence Madoff Investment Securities began as early as 1980 and lasted until its exposure in 2008. Bernard carried out this scheme by soliciting billions of dollars under false pretenses, failing to invest investors’ funds as promised, and misappropriating and converting investors’ funds to benefit Madoff, himself, and others without the knowledge or authority of the investors. To execute the scheme, Madoff solicited and caused others to solicit potential clients to open trading accounts with Bernard Lawrence Madoff Investment Securities (BLMIS) on the basis of a promise from him. He promised to use investor funds to purchase shares of common stock, options and other securities of large, well-known corporations, and representations that he would accomplish high rates of return for client, with limited risk. (“United states of,” 2009) Among other things, Mandoff marketed to clients and prospective clients an investment strategy referred to as a "split strike conversion" strategy. Clients were promised that Bernard Lawrence Madoff Investment Securities (BLMIS) would invest their funds in a basket of approximately 35-50 common stocks within the Standard & Poor's 100 Index (the "S&P l00"), a collection of the 100 largest publicly traded companies in terms of their market capitalization. Mandoff claimed that he would select a basket of stocks that would closely mimic the price movements of the S&P 100. Mandoff further claimed that he would opportunistically time those purchases, and would be "out of the market intermittently, investing clients' funds in these periods in United States Government issued securities such as United States Treasury bills. Madoff also claimed that he would hedge the investments that he made in the basket of common stocks by using investor funds to buy and sell option contracts related to those stocks, thereby
References: 1. Arvedlund, E. (2010). Too good to be true: the rise and fall of Bernie Madoff. Penguin Group. 2. Bernard madoff’s fraud. (2012, June 07). Retrieved from http://www.customwritingtips.com/component/k2/item/8295-bernard-madoff’s-fraud.html 3 4. Kirchner, B. (2010). The Bernard Madoff Investment Scam. NJ: Pearson education, Inc. 5. Markopolos, H. & Casey, F. (2010). No one would listen: A true financial thriller. NJ: John Wiley & Sons. 6. Millstone, K. (2010, March 09). How madoff pulled it off. Retrieved from http://www.cbsnews.com/2100-500395 162-4862910.html 7 8. Strober, D. H. (2009). Catastrophe: The Story of Bernard L. Madoff, the Man Who Swindled the World. Phoenix Books. 9. The madoff red flags, let 's count them. (2008, December 17). Retrieved from http://www.tradersnarrative.com/the-madoff-red-flags-lets-count-them-2154.html 10 11. United states v. bernard l. madoff and related cases. (2009, March 10). Retrieved from http://www.justice.gov/usao/nys/madoff.html