Madoff S Ponzi Scheme Lessons to Be Learned Essay

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Madoff and the Ethics of Business

The author's viewpoint is objective and factual: it relates the episode in history regarding Bernie Madoff's "ponzi scheme" and shows how he was able to pull it off for so long, essentially lying to all of his clients, regardless of their individual worth and/or fame (Stanwick, Stanwick, p. 258).

The major issue presented in this case is the lack of transparency that Madoff showed (a major ethical issue) and the too-good-to-be-true promise of returns that no one else in the investment sector was able to give. Another issue was his closed trading system as well as the fact that there was no correlation between Madoff's reported trade volume and the volume of the S&P options market -- someone was lying. Why the SEC failed to find any evidence of wrongdoing for so many years on Madoff's part should raise questions about the credibility of the SEC. It appears that Madoff was able to divert the eyes of the SEC by flaunting his connections. Only with the collapsing economy in 2008 did the Ponzi scheme finally collapse as too many investors wanted their money back at the same time. Madoff could not deliver and his children handed him over to the authorities, following his confession.

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What is most remarkable about this case is not Madoff's long-running scheme, but the fact that the regulatory body, the SEC, failed to identify it.

In this case, trust and greed were intertwined, as Madoff's run-ins with the SEC never amounted to anything and thus gave him a veneer of credibility to investors: had the SEC done its job, the many red flags would have been enough to shut Madoff down. Since this did not happen, his greed allowed him to continue to bilk investors and thus the two -- trust and greed -- fed off one another in this Ponzi scheme case.

The Ponzi scheme is like a daisy chain of investments. One investor gives the broker $100, for example, and then he promises returns of a certain percent every year and to do so he hooks another investor, and uses the 2nd investor's money to pay off the 1st investor; but then the 2nd investor wants his return too, so the broker needs a 3rd investor, and so on. The last investor is used to pay off the one before, and it works so long as new investors….....

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