The Bernard Lawrence “Bernie” Madoff Scandal

u winhical in the adopt of business. A Ponzi scheme also known as a benefit scheme is an illegal savings scheme where unwary savers argon hookingd into position their money into the fraudulent organizations account with the promise of come out of the closetstandingly high returns. On the surface this may look legitimate. But the occupation is that unlike financial institutions who lend out or invest clients neckcloths Ponzi schemes use funds received from newer entrants to pay out the earlier entrants exorbitant interest rates. They arouse early(a)s greed by provoke them with the prospect of high returns.They pretend and falsify their financial records to create a false sense of stability. No sane government can cash in register such schemes. They therefore operate illegally. Mr. Madoff stands accused of nepotism. This is a business coif why by the owner employs relatives and close associates. Suffice it to say that Madoff had lots than than 25 employees. However those in key positions were family members most of whom owned shares of the company. These include his wife Ruth Madoff, two sons Mark and Andrew Madoff, his brother ray Madoff, Peters daughter Shana, and Madoffs nephew Charles Weiner.It is unethical to use a rise positioned family team to cover up illegal dealings. It is unethical to sent more than $250 billion from his New York-based firm, Bernard L. Madoff Investment Securities obtained ripping off unsuspecting savers in a Ponzi scheme to Madoff Securities International Ltd in the UK, and then back to accounts in the U. S. head teacher 2 Name trey types of parties who were impacted by the actions of Mr. Madoff, and expound how they were impacted. Madoffs friends included business associates who knowingly or unknowingly served to lure customers into his business.While the going was good, they were advantageously rewarded. They occupied positions in charitable organizations, and received sizeable compensations for their service s and cooperation. However when the scheme was busted they lost their positions, face, as well as their incomes. Some politically correct friends had to refund monies that had been given to them with with(predicate) Madoff sponsored organizations. The worst party hit was his customers. Many of them were ruined financially for life. The constitutional loss to investors is reckoned to be somewhere amongst 12 to 20 million dollars. On the flip side, there are those who gained.According to minutes from the trustee to the highest degree $36 billion was invested into the scam, returning $18 billion to investors, with $18 billion missing. This being a benefit scheme about half of Madoffs investors were net winners, earning more than their investment. The extend of embarrassment Madoffs family experienced can only when be imagined. Apart from loosing face, they lost a lot of assets. Their bank accounts were snappy and property confisticated. They are also facing legal charges for ne gligence, and breach of fiducial duty by virtue of being accomplices with Madoff.Question 3 Describe deuce-ace business safeguards ( risk of exposure management) that may consider prevented the harm caused by Mr. Madoff. Government regulations The escape funds industry is considered as low risk. While the law enforcers are very strict with the banking and insurance sectors, they do not pay much attention to hedge funds. This made it easy for a smooth floozie like Madoff to receive money from investors and manage the same which is illegal. He achieved this through engaging various institutions who were themselves under government regulations. Stricter regulatory and standardizing approaches of the hedge fund industry need to be put in place.a best exercising charter should be drawn and implemented. Proper audit of the Madoffs proceedings would countenance revealed anomalies. Independent external auditors would have done the job sufficiently. Question 4 Describe three ways cla ndestine investors might have better protected themselves from risk. Due diligence in this case is the realize of monitoring and reviewing the operation and management of hedge funds and those managing them. The collapse of Madoff was an pricey lesson in the importance of investors and their advisors carrying out thorough due diligence and not relying on word of mouth endorsementDiversification of risk the nature of a pyramid scheme is to so attractive that potential investors have no other option but put their money in there. With high returns and no fees charges investors were sold. It did not occur to them to avoid putting all their eggs in one basket. There are two types of investors risk self-opinionated risk and market risk. Systematic risk is associated with a single auspices and is reduced by diversifying or investing is other types of securities. Market risk is occasioned by economic forces and can not be wished away. (Petty 2007)Refraining from greed The precept that when the deal is too good, think double came true for the victims of the Madoff scam. The profile of its victims is not simple individuals disconnected from the financial markets and its remote mechanisms but investors who presumably have an expert knowledge of the trade of financial investment rich private individuals and large financial institutions. The deal was just too good that they unlikable their eyes to anything else. It is a lesson to all that when investing one has to be take headed and not let themselves be overtaken by greed.Question 5 Describe three legal actions that possibly may be brought against Mr. Madoff under criminal or civil law. Securities fraud the SEC regulates against trading based on randomness that is not available to the public, Accounting fraud and misrepresentation (presenting misleading or untrue information about a company, or its securities, to an investor or the public). This curse clear him a maximum penalty of 20 years in prison hunky-dor y of the greatest of $5 million or twice the gross gain or loss from the offense restitution.International money wash In his book Money Laundering, Leonard Jason-Loyd describes it as a form of criminal activity where by money is placed in banks then passed through a number of transactions to act as a smoke screen in order to hide the origin of the cash and later returned to the launderer via the legitimate financial system. (p. 2). Madoffs crime of transferring funds between his New York-based brokerage operation and the London trading desk earned him a maximum penalty of 20 years in prison, fine and restitution.False Statements reservation a false filing with the Securities and Exchange Commission including processed depot trades, use of client money as collateral to obtain loans. This earned him a maximum penalty of 20 years in prison, fine and restitution. References Caruso, D. B. , February (26, 2010) (2 June 2010). Former Madoff Aide Charged with Conspiracy, and Securities Fr aud. The Associated Press Retrieved from www. law. com/jsp/article. jsp? id=1202444611999 United States Lloyd L. J. (1997). The Law on Money-Laundering Statutes and Commentary, London, Great Britain, Frank Cass & Co.Ltd Madoff scandal poses challenges for directors (21 Dec 2009) (2 June 2010) Risk heed Lessons from Madoff Fraud Retrieved from www. lloyds. com Petty, w. , Keowon, A. J. , Scott JR, D. F. , Martin, O. N. , Burrow, M. , Martin, P. , Nguyen, H. (2006) Financial Management, Frenchs Forest, NSW, Australia, Pearson Education Australia. Silver, V. , Glovin, D. , (2009, 13 Feb), (2 June 2010). Madoff Scandal Ensnares Order of helper Saint for Moralists. Bloomberg News, Retrieved from www. bloomberg. com/apps/news? pid=20601109& refer=home