The Ponzi Scheme

The Ponzi scheme Bernard L. Madoff entered a federal courtroom back in March of 2009 to admit that he had run a vast Ponzi scheme that robbed thousands of investors of their life savings. A Ponzi scheme is when potential investors are wooed with promises of usually large returns, usually attributed to the investment manager’s savvy skill, or some other “secret sauce”. Returns are repaid, at least for a time, out of the new investors principal, not from profits. This can continue as long as new investors line up with cash, and old investors don’t try to withdraw too much of their money at once. Bernard Madoff’s Ponzi scheme was Wall Street’s biggest and longest fraud. The court appointed trustee estimated the actual losses of the investors to be about $18 billion. United States v. Bernard L. Madoff, 09 Cr. 213 (DC), was assigned to United States District Judge Denny Chin. On March 10, 2009, a Criminal Information was filed in Manhattan federal court charging Bernard L. Madoff with eleven felony charges including securities fraud, investment adviser fraud, mail fraud, wire fraud, three counts of money laundering, false statements, perjury, false filings with the United States Securities and Exchange Commission ("SEC"), and theft from an employee benefit plan. There was no plea agreement between the Government and the defendant. On March 12, 2009, Madoff pleaded guilty to all eleven counts. On June 29, 2009, Madoff was sentenced by Judge Chin to a term of imprisonment of 150 years (United States Department of Justice.gov, 2009). The judge imposed a sentence that was three times as long as a federal probation office suggested and ten times as long as the defense lawyers had requested. Congressional testimony from a whistle blower increased the fury with this case. The whistle blower had repeatedly alerted the Securities and Exchange Commission about his suspicion that Mr. Madoff was operating a gigantic fraud. The S.E.C. then started an internal investigation

References: Henriques, D. B. (2009, June 29). Madoff is sentenced to 150 years for Ponzi scheme. Retrieved January 16, 2013, from httpl://www.nytimes.com/2009/06/30/business/30madoff.html?pagewanted=all&r=0 Henriques, D. B., & Healy, J. (2009, March 12). Madoff goes to jail after guilty pleas. Retrieved January 16, 2013, from httpl://www.nytimes.com/2009/03/13/business/13madoff.html?pagewanted=all&_r=0 United States v. Bernard L. Madoff. (2009). Retrieved January 19, 2013, from httpl://www.justice.gov/usao/nys/madoff.html