The Bernie Madoff Ponzi Scheme

The Bernie Madoff Ponzi Scheme
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The Bernie Madoff Ponzi Scheme
During a financial crisis, reports and experts state that financial institutions experience liquidity shortages, consumers and businesses cannot pay their debts, and asset prices generally see a steep decline in value (Azim & Azam 2016). In most cases, experts associate a financial crisis with a bank run or panic during which investors withdraw money from savings accounts or sell off assets because of fear that the value of the assets might drop if most remain in a financial institution (Quisenberry 2017). Indeed, one of such financial crises can happen due to a Ponzi scheme, which is a setup that usually draws investors in by promising and guaranteeing some absurd high returns and is also run by a central operator. In this case, the individual uses the money from new, incoming, and unknowing investors to pay off the stated and promised returns to the earlier and old ones. Hence, a great example of such a Ponzi scheme was one by Bernie Madoff, which was also a highly irresponsible financial event.
Indeed, research shows that in the case of Bernie Madoff, one of the most puzzling aspects is why the individual even decided to commit such fraud, yet his business was a legitimate brokerage, which was also highly and wildly successful (Quisenberry 2017). As a result, the business had made him and his family so wealthy, which means that the man did not have any financial need to milk thousands of people or clients out of so much money that was almost billions of dollars.
Hence, the Ponzi scheme, reports show that the wealth management part of his brokerage business operated it, making it both a frighteningly classic and straightforward Ponzi scheme. The scheme involved Madoff attracting several investors (Azim & Azam 2016). In this case, the individual would promise the investors some extraordinarily and unreasonable high returns on most of their investors.
However, things went wrong when the investors handed over the money to Madoff. The individual would merely deposit the investors' funds into the Chase Manhattan Bank, his personal bank account (Quisenberry, 2017). On the other hand, as for the earlier investors, Madoff paid "returns" using the latest investors' funds or instead sent to him.
As a result, some of the entire fabrications concepts were the clients' trading statements, which showed their alleged profits. Nonetheless, since everything that has a beginning always has an end, in 2008, everything fell apart when many investors had had enough and wanted to cash out their inv...