It is in times of crisis when pyramid schemes become relevant. This is due to the fact that credibility to usual financial instruments decreases, but investors are trying to do everything not to lose the remaining funds.
It should be noted that virtually no one is insured from being one of the members of the financial pyramid. The most striking example is the financial pyramid “Madoff Fund” which was founded by a well-known swindler Bernard Madoff.
Bernard «Bernie» Lawrence Madoff comes from New York. There in 1938 a boy was born in a Jewish family, the future of whom would be equally terrible and great.
However, as a child, Bernard was little different from his peers: he finished a prestigious school Far Rockaway without distinction, then studied at Hofstra College and received a bachelor’s degree in politics. Like Charles Ponzi initiated his Ponzi scheme with only a few hundred dollars in his pocket, similarly Bernard Madoff started from scratch.
While studying in college, he worked part time as a laborer managing to save about $ 5,000. It was enough for Bernard to start his own company Madoff Investment Securities, where he then employed some of his relatives.
Bernard participated in creating Nasdaq, the US stock market, buying and selling securities for the benefit of investors. His company Investment Securities was one of the largest bidders at Nasdaq. By the beginning of 1990s, Madoff was the chairman of the board of directors of Nasdaq. Over time, Madoff Investment Securities was recognized as the most reliable investment fund in America and around the world. It is worth noting that for all time of its existence it brought high profits – about 12-13% per annum.
Creating the broker-dealer business and trading securities continued for more than 40 years. Madoff Investment Securities sold stocks, bonds and other securities beneficially for themselves and for clients. Experts estimated Madoff’s business incomes worth $ 67 million in 2006. Net trading in 2006 brought $ 72.5 million, and expenses of the company amounted to only $ 30 million.
At the same time in the skyscraper where there was residence of Madoff Investment Securities, this trickster managed to organize “two businesses” – one legitimate – which was a broker-dealer company, and the second – fraudulent – a hedge fund, which was not limited by regulation, unavailable for a large number of people.
The first business was controlled by SEC (the Securities and Exchange Commission). All – brokerage books, statements, cash flows, transactions – were subject to supervision. Not less than once every 2 years there came auditors with inspections. In short, it’s just perfect.
Continue to The Part 2