The 'Bernard Madoff' Financial Scam


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Please note:

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.

Case Details:

Price:
Case Code : FINC055 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges

Themes

Corporate Scams, Controversies
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

Abstract:

The case examines the 'Ponzi Scheme' operated by Bernard Madoff (Madoff), a prominent Wall Street trader and former Chairman of NASDAQ, through the investment management and advisory division of his firm, Bernard L. Madoff Investment Securities LLC (BLMIS). During the investigation, it was revealed that Madoff operated the 'Ponzi Scheme' since the 1980s. Though Madoff was supposed to invest the clients' money in securities market, he deposited the entire amount in a bank account in Chase Manhattan Bank. He fulfilled redemption requests of his clients using this money. This fraud that amounted to US$ 50 billion became public with Madoff's confession on December 10, 2008.

It was the biggest financial fraud in the history of the US affecting a large number of investors. Industry experts blamed the regulators and investors for neglecting the warning signals which enabled Madoff to carry on with the fraud for decades. The case ends with a discussion about the impact of the scam on the already strained US economy.

Issues:

» Analyze how Bernard Madoff conducted the fraud.

» Understand the events that led to the disclosure of the fraud.

» Examine the role of regulatory agencies and the reasons for not detecting the fraud.

» Analyze the impact of the fraud on the US economy.

Contents:

  Page No.
The Confession 1
The Man behind the Scam 2
How Did The Fraud Happen? 3
The Ponzi Scheme Exposed 5
Why Did The Fraud Happen? 7
The Aftermath 9
Did Madoff Act Alone? 9
Exhibits 11

Keywords:

Bernard Madoff, Financial Scam, Ponzi scheme, Bernard L. Madoff Investment Securities LLC, NASDAQ, Split-strike conversion, Corporate Frauds, Options, Financial Scandal, Standard & Poor's 500 index, Global financial crisis, US Mutual Funds Industry, Regulations for Mutual Funds, Investment Management, Financial Industry Regulatory Authority, Hedge Fund, Harry Markopolos, Securities Exchange Commission, Friehling Investment Fund, Charges against Madoff

The Confession - Next Page>>

 

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