Madoff's Case

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It is so truly human to desire to earn much money in a very short period of time, and not just to earn it, but rather to get it in a way, which would not necessarily presuppose any work or effort. In order to illustrate this statement one can easily cite a number of fairy tales of different nations all over the world, where the main character would in  a very short period of time gain almost unlimited supplies of money, by means of doing something very simple, or finding a hoard for that matter. In other fairytales we face the character, who does nothing, just hangs around and then, all of a sudden, marries a rich and beautiful lady or. People would look for such opportunities, pray and expect them, this is why people have been playing games of interest, and this is why people buy lotteries. As Janis Joplin's (ND) goes "Oh Lord, won't you buy me a color TV?
Dialing for Dollars is trying to find me.
I wait for delivery each day until three,
so oh Lord, won't you buy me a color TV? » This may sound funny, but, this is a natural desire of people, which was taken into consideration, when the TV casts, such as "Dialing for Dollars" were designed.

The same very feature of human character was thoroughly considered by Charles Ponzim, a man, who was the first to develop and apply a financial scheme, where the participants of the financial institution, may it be called so, would get their income not from the income of the fund itself, earned by means of investment activities of various kinds, but from the money, invested into the fund by the following participants, or, at times, from their own money. Ponzi created his scheme in 1920, (Peck, 2005). However it was not him, who invented the whole scheme. The scheme was described before, and two of the most famous descriptions of such a scheme belong to the writings of Charles Dickens. They can be found in his "Martin Chuzzlewit" and "Little Dorrit", both written in the middle of the XIX century (Markopolos & Casey, 50).

However when speaking of the most significant Ponzi Scheme, we certainly first of all think about one of the most recent scandals in this field, which occurred in the US in the end of previous decade. It was the ponzi scheme, created and run by Bernard Madoff, born in the year 1938 in the US. Bernard Madoff was very well known for having founded the company, named Bernard L. Madoff Investment Securities LLC in 1968 in Wall Street, and ever since and until the date of his arrest in 2008 Madoff was the company's chairman (Henriques, ND).

The company was one of the top businesses on Wall Street, and was very much trusted and known for bringing high and stable income to its investors. Madoff, however, did not get his funds out of thin air. On the contrary, he earned his first savings (5000 USD) by working as a lifeguard and an installer of Sprinklers. And that was the money, with which he started his business in 1968. Later on he addressed his father-in-law to get a loan of $50000 for further development of his company.

The scheme kept on functioning and was believed to be an investment company, and the clients were quite happy with the income, brought to them by the company. For a very long time people did not suspect anything, - it is so natural not to think about possible unfortunate outcome, while things are going well. Besides, Madoff was investing substantial amounts of money into medical researches, having to do with diabetes and cancer, into theatre, art galleries and other forms of art. This made his reputation even stronger. So, people, the clients off Madoff's company preferred not to know too much. However in the year 1995, when Harry Markopolos (a financial analyst) reported to SEC, that according to his personal calculations the company could not be making that much money as they claimed to. According to him, it took him no time to realize, that the figures did not add up, and a few minutes were required to try to recalculate all the figures several times and fail to receive the results, which would be at least anywhere close to what Madoff had. However, his arguments were ignored several times. Finally Markopolos wrote a book "Nobody would listen" describing the situation and showing how evident the fraud was.

However in the end of the 2008, when the world's financial crisis started, some of the major clients of the company asked to return their money. And this was the end of the scheme. Madoff simply had no money to return the debt. His sons came to him how on Earth he was planning to pay the customers and a substantial sum of bonuses, which he was supposed to pay that month. Madoff told them, in the presence of his wife, that the thing was over with, he called his company "Just one big lie" and told them, there was no money for covering any debts. It did not take the sons of the "big lire" to go right to the FBI and report his father's scam to the officers there. (Overacts & Glovin, ND). It is important to underline, that Madoff admitted his fraud. He was sentenced to 150 years of being in prison. Tithe mechanism of the fraud was very simple: the company accepted money from the investors, but never invested it into anything or did anything else with it. The money was stored on the bank account. Meanwhile, the documentation was manipulated in different ways, by means of special backdating software the orders were dated with whatever dates Madoff may desire to see on them. But when the clients applied for their interests, he used the money, deposited on the account, for repaying the customers.

It is estimated, that total amount of money, owed to the customers of Madoff's company is approximately $57, while only a little more than 17 billion were in fact invested by the customers (Irving, ND).

Madoff himself is still alive and is imprisoned, while a big number of his clients have not been able to obtain any of their money back and will hardly be able to. The sons of Mad offs did not live a happy life after his father's sentence. One of them hung himself two years after father's imprisonment, while the other was also sentenced to imprisonment, as a participant of the scheme.

This case shows us one of the brightest examples of what extreme desire to have unlimited desire of money can result in. Neither of the parties, as it can be seen, enjoyed their benefits of the situation, despite trying and hoping.

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