Madoff “Ponzi” Scandal
- 02.04.09
- On the Spotlight, money
Bernard Madoff, the latest scandal in Wall Street pegged as the largest ponzi scheme, is the featured article on the spotlight! I was watching Bloomberg News last night when his case was being heard at the court hearing. The speaker relentlessly told that it was the fault of Securities and Exchange Commission’s lack of regulation that led to the largest ponzi scheme worth about $50 Billion.
But how did it go? Being a former Chairman of the NASDAQ stock exchange, Bernard Madoff had a lot of connections with philantrophists and entrepreneurs. His fund was considered as “exclusive” to those high networth individuals and hedge funds. He played a VIP type persona that he rarely meets investors themselves which therefore increased the lure of the investment scheme.
According to some investors which I read online, they really trusted Madoff. His sales agents were well dressed promoting the investment scheme in Europe, South America and even Asian countries such as China. According to them, the fund were constantly giving them good returns for decades and if you wanted to take out your money, you can just get it in a matter of few days so the fund looked stunning and impressive.
The collapse started when the stock market plunged as effects of the global recession slowly unravels. Investors started withdrawing billions worth of their invested money. To pay off these investors, Madoff had to get another money from new and fresh investors just to keep it afloat. It was definitely a ponzi scheme and on December of last year, Madoff admitted it to his sons Mark and Andrew that the fund has no more money to pay off investors.
A lot of companies, even big banks, and private individuals had millions and billions worth of losses due to the failure of the fund. Some of these were: Fairfield Greenwich Advisors, Tremont Capital Management, Banco Santander, Bank Medici, Ascot Partners, Fortis, HSBC, BNP Paribas, UBS Bank, Nomura Holdings, and Aozora Bank. For the complete list, access Madoff’s clients.
I guess we really need to have a detailed due diligence before we invest our hard earned money with institutional investment companies. This is another burden to the already “breathing hard” economy with a lot of companies declaring bankruptcy and mounting job lay offs around the world.
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