Ponzi Schemes Essay

1150 words - 5 pages

1. Charles Ponzi was a working-class Italian immigrant who was eager to find success in America. Bernard Madoff was already a multimillionaire before he started his scheme. Does that make one more unethical than the other? Why or why not?
No I don’t believe it does make one more unethical then the other. Yes, Charles Ponzi was opportunistic trying to make his way in America while Madoff was a Wall Street financial fixture well aware of the risks he was taking. Charles Ponzi and Bernard Madoff both made unethical decisions regardless of where the intent originated. The pair lied to their investors; the stakeholders of their organization, in all sense of the word as there were no true business ...view middle of the document...

The mission of the SEC as stated on their website is as follows “The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation” (U.S. Securities and Exchange Commission). So to say it is the responsibility of the SEC to oversee registered broker-dealers, transfer agents, clearing agencies, investment companies and investment advisers would be a correct assumption. It has been reported that “SEC had been tipped as early as 1999 that Madoff, a former Nasdaq chairman and fixture on Wall Street for decades, was running his private investment vehicles as a Ponzi scheme” (Moyer). So why then was the full Madoff scheme not uncovered until 2008? SEC’s own Inspector General compiled an internal report after the Madoff Confession showing “a chronology that tracks fifteen years of missed opportunities and considerable incompetence” in regards to uncovering the Madoff scheme (Turner).

4. Does the fact that Madoff offered less outrageous returns (10-18 percent per year) on investments compared to Ponzi’s promise of a 50 percent return in only 90 days make Madoff any less unethical? Why or why not?
No, the two of them both lied and mislead their investors it was unethical whether it was one hundred dollars or one million dollars. The fact is they were capitalizing on the misfortune and trust from their investors the stakeholders. Ponzi’s scheme was just less sophisticated in its operation; he was just attempting to get rich quick. I don’t believe he was entirely sure of the intricacies of investing. Madoff on the other hand if anything was more unethical in his scheme as he knew how to cover his tracks, how to avoid being discovered, and how to use creative bookkeeping techniques to avoid detection. As CNN correspondent Bandler illustrates “People believed in Bernie. Nasdaq made him its chairman; the SEC appointed him to industry panels; Congress invited him to testify” (Bandler). He played the game and stayed low on the radar until his confession after the stock market crash.

5. Can the investors who put their money in Madoff’s funds without any due diligence, often on the basics of a tip from a friend or a “friend of a friend,” really be considered victims in this case? Why or why not?
This is a grey area for me and is definitely an ethical dilemma....

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