Madoff: My Investment Company Is a Ponzi Scheme
Bernard Madoff, president of Bernard L. Madoff Investment Securities, has admitted that his entire company was a huge scam, basically a ponzi scheme (also known as a pyramid scheme). Madoff has been charged with securities fraud, and is out on $10 million bail.
If you were a new investor, your money was getting used to pay out earlier investors. Yes, it was illegal.
But nobody seemed to notice for a very long time.
“It’s all just one big lie,” Madoff told his employees on Dec. 10, according to the government. The firm, Madoff allegedly said to them, is “basically, a giant Ponzi scheme.”
Madoff faces as much as 20 years in prison and a $5 million fine if convicted. His New York-based firm was the 23rd largest market maker on Nasdaq in October, handling a daily average of about 50 million shares a day, exchange data show. It specialized in handling orders from online brokers in some of the largest U.S. companies, including General Electric Co. and Citigroup Inc.
Wall Street is driven by emotion and trust. Clearly some of that trust was misplaced.
It appears that rather than paying investors back based on profits they earned, he was pulling money out of the principal from other investors -- and now there's basically nothing left. Not surprisingly, the firm's website touted Madoff's "high ethical standards." What's even more astounding is that no one happened to notice this was happening until he 'fessed up.
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