Ponzi Scheme

I would like to discuss the Post with some basic concepts based on the research about the "Classic affinity scam" or "Ponzi Scheme" also called as "Madoff Investment Scandal".This Scam was estimated worth of $64.8 Billion which resulted in collapse of Investments in the global community and effected from the prominent celebrities to the veteran pensioners.

Bernard Madoff the founder of Bernard.L.Madoff Investment securities LLC in the early 1960's was it chairman and also had some prominent positions like chairman of NASDAQ stock exchange and positions for several industry regulatory boards as well as most powerful or influential person of "Wall Street". He was the most trusted person until his act of Ponzi scheme was discovered.In this
investigation by Harry Markopolos which took him just 5 minutes to identify the fraud by glancing his revenue stream and four hour of maths that made his fraud evident of the fraud.

Investment Fraud Concept: The Investment Fraud Concept was based on the Ponzi Scheme in which the investors in the firm should be payed by the profits earned from the firm,but in the scheme the " existing investors were payed capital returns from the new capital derived from new investors",it was more like" Robbing Peter to Pay Paul concept" in which he had stolen billions of dollars.So the concept is paying existing investors with help of new investors and this would go on and on even it was investigated that " Leverage Finances" were involved.

Testimony: After Harry Markopolos testifying before the US Congress house financial service committee's financial capital market panel that he had found about the fraud that had ensured investors about " returns Stream" which never existed in finance.The "return stream" had ensured investors of higher returns within short terms.This had made him and his five men team to carry out a more profound investigation on the documents, account balances and keep a track of incoming and out going deals on shore and off-shore investments.
As Madoff advanced with making the largest deals with firms like firms like Fair fax that had made a "feeder fund investment" and also with European based firm run by Villehuchet and also no of small groups that he had links with,like the country club, Long Island Jewish Community.This had almost 162 pages worth of investors that had invested in to his wealth Management
services.

After evident reports submitted between the years of May 2000,October 2001,October and November 2001,June 2007 and finally April 2008 to SEC , the organization had become a blind eye failing to investigate the scam. As the SEC employee's were not well trained at the finical investment forensics or were afraid of Madoff. In one of the reports that Markopolos submitted to SEC with 29 to 30 Red flags risking his life and his family it was ignored by SEC (No one would Listen: A True Financial Thriller) 2010,Markopolos.As SEC was an organization that would take these scams seriously against the most influential and prominent persons,but it had failed. The organizations at federal level( Federal Industry Regulatory Authority) FINRA which had no affect.Later on sending packages of the documents in November 2005 to the New York Attorney general Spitzer's, who successfully filed law suites against the Madoff.

In my view the SEC initially had ignored which every organization does as none could imagine such a crime committed against a trusted person or Trusted criminal, but after so many reports and continuous warnings year after year and their fail to investigate throughly or keep check on the organizations or also have the suspected persons and their activities spied,with professionals in that field auditing the accounts and income , would have caused less damage or would initially keep away from cheating the whole global community. As many have lost their homes, Medical services, Community service and Student Scholarships. The entire scheme has made many lives miserable and also led to cause a partial genocide among huge investors.

Whistle Blowers: I would rather call them true Hero's as the credit not only goes to Markopolos , but his brave 5 men team that collected and kept track of every information and risked their lives , families and come forward to the save the nation.These are as equal to men and women that serve the armed forces.As Madoff and his brother were a influential men and could have get them and their families killed. In spite of such a risk they had stood against all the odds and made it aware before it could turn more worser. Markopolos a whistle blower in this scam should have been recruited in to a federal organization in such contribution and also to train others, this would put a curbs to the many ongoing and unknown Scams.
Conclusion: This has shown that the so called federal organization"SEC" fear prominent and influential people and work under them.If a any of the staff of SEC would have testified against Madoff, he would have been killed.In a developed country it is unfortunate that,their is no protection for truth neither it is cared for until the situation worsens and becomes an eye-opener.As many as agencies either in the state or at federal level could not investigate such frauds, but have priorities for other unwanted activities.The pure negligence if in future could result in causing effects like" Great depression","economic slow down" and "Recession" which would lead to other
issues.