The 'Bernard Madoff' Financial Scam


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Case Details:

Case Code : FINC055
Case Length : 16 Pages
Period : 1990-2008
Pub. Date : 2009
Teaching Note :Not Available
Organization : Bernard L. Madoff Investment Securities LLC
Industry : Banking & Financial Services
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

The Man behind the Scam

Bernard Madoff was born in 1938 in Queens, New York, US. Madoff graduated from Far Rockaway High School in 1956. In 1960, he completed his graduation in political science from Hofstra University. In the same year, he started a financial firm, Bernard L. Madoff Investment Securities LLC (BLMIS) with US$ 5,000...

How Did The Fraud Happen?

BLMIS had an investment management and advisory division. In this division, customers' money was supposed to be managed in individual trading accounts.

Clients were told that their money would be invested in 'shares of common stock, options, and other securities of large well-known corporations'...

The Ponzi Scheme Exposed

Madoff was able to attract a significant amount of money for his investment management and advisory business. In January 2008, Madoff claimed that the BLMIS investment management and advisory division was managing US$ 17.1 billion for 23 clients. However, in late 2008, his investment firm started facing problems because of the global financial crisis.

In 2008, the US economy was slowing down, and there was a credit market squeeze and a liquidity crunch in the market. In the fourth quarter of 2008, the real GDP of the US declined by 6.2 percent compared to the third quarter of 2008...

Excerpts Contd...>>



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