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Bernard Madoffs
Ponzi Scheme
H Bo Ngc BA00235
Hong Qunh Ngc BA00262
Hong Th Thanh Thy BA00247
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Introduction
One of the largest financial frauds in the
end of 2008 by Bernard Madoff.
He was arrested and charged with
operating a major Ponzi scheme.
Pleaded guilty to 11 counts of financial
fraud and theft in March, 2009 .
Was sentenced to 150 years in prison.
Madoffs fraud cost: > $10 billion.
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Introduction
How A Ponzi scheme attracts investors?
Promise of high returns (Initially paid out from
the investment of subsequences clients rather
than legitimate profit from the initial investment).
Success initial investments entices future
investors.
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Introduction
Why the case attracted media attention?
The size of the fraud, the amount of money.
Madoff and his family were famous public
figures (Madoff- chairman of NASDAQ stock
exchange and generous philanthropists).
Victims are prominent people (personal
friends, charitable organizations, etc.).
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Introduction
The failure of Government.
Started in 1992, Securities and
Exchange Commission (SEC)
received complaints and tips
about Madoffs investment
They didnt investigate on a
cursory.
The limitations of legal reputation
to unethical business practices.
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Ethical Issues
From Madoffs behaviors:
His unethical behavior creates legal risks for a
business and financial risks.
Use the trust of stakeholder (investors, friends,
charitable organizations) to gain benefit.
Madoff is well-known as generous philanthropists and
he gain money from charitable organizations.
From Government:
Securities and Exchange Commission (SEC) didnt
investigate on a cursory and the limitation of
government regulations.
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Reason for taking ethical issues
Ethical values is not a personal and selfish well-
being. (Madoff concerned only money and profit
for him, did not concern victims)
Ethically responsible business decision is
obeyed by the law, however, Madoff did not do.
The law provides an important guide to ethical
decision-making. The limitation regulations of
government is leading the continuous fraud.
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Consequences of Madoff fraud
Madoffs business is collapsed.
Negatively affected Stakeholders:
Investors
Employees
Creditors
Charities
Local communities
Government
Negative impact on the economy
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Solutions for the Madoff fraud
Governments actions:
Strengthen financial regulations and investigations.
Develop legislation to discourage future financial
fraud cases.
Restitute the victims of the scandal.
Investors should protect themselves from fraud:
Demand regular audits of their firm.
Consult external experts.
Pressure the management to make the accounts
public.
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How to prevent similar scandal?
Employee Motivation: High motivation level
employees are less likely to engage in fraud or
other unethical behavior.
Audits: Audits would have revealed the fraud in
a timely manner and prevented further losses to
the organizational stakeholders.
Technology: Technology should have been used
to restrict access to information.
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Thanks for your attention!!!