Bernie Madoff's Ponzi Scheme Essay

Bernie Madoff ran one of the biggest Ponzi schemes in history. Throughout all the years he was running his scheme, there were several opportunities for the Securities and Exchange Commission (SEC) to catch and stop his activities. Instead, failure to follow through in investigations allowed Mr. Madoff to continue his Ponzi scheme for as long as it did. The most significant reason investigations into Madoff failed where because the SEC was incompetent. They missed red flags, failed to follow through on tips, and allowed personal biases to get in the way of uncovering his scheme.

The first time the SEC investigated Bernie Madoff was in 1992 as part of the Avellino and Bienes (A&B) investigation. In that investigation, A & B was investigated

The returns through Madoff were higher than any other rates offered through any other investments, and there was no way Madoff could consistently meet the returns

Lack of trained investigators bias against tipsters, and no communication between offices and investigators led to the failure of the later investigations. In the first investigation of 2005, when the supervising investigator discovered Madoff was not using the Barclays bank, he ignored the information. He did not send it to the investigators (pg. 144), who could have used that information as proof Madoff was lying. The investigators not knowing about the 2003 investigation is another example of the lack of communication between the offices of the SEC. The biggest failure in the investigation in November 2005 was the SEC’s failure to follow up on the document Madoff submitted with the list of DTC accounts. If the SEC had followed up and called the DTC, they would have discovered Madoff’s Ponzi scheme, but they didn’t. Furthermore, the team investigating Madoff failed because they were inexperienced; they had no previous experience dealing with a Ponzi scheme (pg. 154) and were untrained in what to look for when investigating