Tech & Biz

Madoff: My Investment Company Is a Ponzi Scheme

by Jordan Yerman | December 12, 2008 at 08:49 am

1405 views | 15 Recommendations | 8 comments

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.

Talk about white-collar crime: this guy really swung for the fences. Any guesses on what his sentence might be should he be convicted?

1 See all footage | View Slideshow

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reign99 (not verified)

at 13:00 on December 12th, 2008

I love that he's only facing 20 years in jail. This guy singlehandedly destroyed wealth in excess of the current Big Three bailout request. Literally the money he fraudulently lost would have been more than the Big Three are asking for. How many peoples lives are going to be destroyed because of this man? How many companies will hit Chapter 7 thanks to this selfish piece of pond scum?

Our economy was suffering from a huge lack of trust in its viability. This may kill that trust completely.

mkrigsman

at 17:51 on December 12th, 2008

Jordan Yerman

at 07:09 on December 14th, 2008

Gh0s7 has related coverage as well.

bob j (not verified)

at 21:51 on December 14th, 2008

Only Individuals can file chapter 7 not companies

SOLARLIFE

at 10:45 on December 15th, 2008

jordan, congratulations top report, this is amazing looking the video report with no page delay change.

Madoff got out on $10 million bail, he paid in cash or with a "leverage future option", no joke will he get a $50bn bailout from his friends to continue the show. That's what he was thinking, as long as you are big player you don't ditch.

SOLARLIFE

at 01:18 on December 18th, 2008

DEC 18, today yahoo talking about $1500bn lost in the Madoff scam, I can't believe it many french "countryside" investors lost their money in Funds buying securites from Madoff

James o (not verified)

at 17:06 on December 18th, 2008

Freeze all of his familys fund and shoot him in the head

AngelaJ

at 00:02 on March 27th, 2009

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Thanks for opening this topic! The good thing in this issue is that is already revealed and this will put an end to it. The Bible is right, "Today has enough trouble of its own." Not having money is maybe less stressful than having it taken away. Some people obsess over hidden treasure. Dreams of finding some vast hidden treasure out on some Caribbean Island is usually a byproduct of watching too many pirate movies and not researching what actually went on with them. (Most pirate raids were for primarily two things, food and booze.) Anyway, a lot of people are looking for where Madoff stashed his loot and they'd get some short term loans to try and find out just where it was he hid it. It is highly unlikely that he hid a treasure chest full of cash and bond coupons, so anyone looking to get out the metal detector will just have to get used to disappointment - as they won't likely find any of his hidden treasure.