Answer to Question #227780 in Management for Aliyah

Question

The Madoff investment scandal was a major case of stock and securities fraud discovered in late

2008. In December of that year, Bernie Madoff, the former NASDAQ chairman and founder of

the Wall Street firm Bernard L. Madoff Investment Securities LLC, admitted that the wealth

management arm of his business was an elaborate multi-billion-dollar Ponzi scheme.

Required:

Give a brief background to this scandal. Highlight, the structure and what caused many companies

to buy into this idea. In your analysis, include the impact of this fraud on many businesses

Answer 1

The firm was started in 1960 and employed close family members to executive positions of power. In March 2009 Mr. Madoff pleaded guilty to operating the largest Ponzi scheme in human history. The scheme was estimated to be 64.8 billion dollars with the firm having liabilities of Over 50billion dollars. As of 2008 the firm had defrauded their over 4800 clients. Fictitious accounting done by the firm made many companies buy into the idea as well as the advice given by the firm. The scandal had a negative impact on many businesses as the assets freeze of both personal and business assets of Mr. Madoff made some firms to temporarily close.