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    Case 1 Ethics Finance Group 7

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    Giane Fks Marie
    Bernie Madoff is primarily responsible for the Ponzi scheme fraud for knowingly using deception to gain investors' trust and freedom in designing the fraudulent plan. While Madoff holds most of the blame, the US SEC also shares responsibility for failing to uncover the fraud despite conducting investigations and missing red flags like unusually high returns with little risk. The fraud went undetected for so long due to a lack of professional oversight by regulators. Key red flags of Ponzi schemes include high returns with no risk, a lack of transparency about investment strategies and funds usage, and difficulties receiving payments. Future frauds can be prevented by increased financial education, regulations like more frequent audits, and learning from past mistakes.

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    Case 1 Ethics Finance Group 7

    Uploaded by

    Giane Fks Marie
    13 views2 pages
    Bernie Madoff is primarily responsible for the Ponzi scheme fraud for knowingly using deception to gain investors' trust and freedom in designing the fraudulent plan. While Madoff holds most of the blame, the US SEC also shares responsibility for failing to uncover the fraud despite conducting investigations and missing red flags like unusually high returns with little risk. The fraud went undetected for so long due to a lack of professional oversight by regulators. Key red flags of Ponzi schemes include high returns with no risk, a lack of transparency about investment strategies and funds usage, and difficulties receiving payments. Future frauds can be prevented by increased financial education, regulations like more frequent audits, and learning from past mistakes.

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    Bernie Madoff is primarily responsible for the Ponzi scheme fraud for knowingly using deception to gain investors' trust and freedom in designing the fraudulent plan. While Madoff holds most of the blame, the US SEC also shares responsibility for failing to uncover the fraud despite conducting investigations and missing red flags like unusually high returns with little risk. The fraud went undetected for so long due to a lack of professional oversight by regulators. Key red flags of Ponzi schemes include high returns with no risk, a lack of transparency about investment strategies and funds usage, and difficulties receiving payments. Future frauds can be prevented by increased financial education, regulations like more frequent audits, and learning from past mistakes.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    13 views2 pages

    Case 1 Ethics Finance Group 7

    Uploaded by

    Giane Fks Marie
    Bernie Madoff is primarily responsible for the Ponzi scheme fraud for knowingly using deception to gain investors' trust and freedom in designing the fraudulent plan. While Madoff holds most of the blame, the US SEC also shares responsibility for failing to uncover the fraud despite conducting investigations and missing red flags like unusually high returns with little risk. The fraud went undetected for so long due to a lack of professional oversight by regulators. Key red flags of Ponzi schemes include high returns with no risk, a lack of transparency about investment strategies and funds usage, and difficulties receiving payments. Future frauds can be prevented by increased financial education, regulations like more frequent audits, and learning from past mistakes.

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    © All Rights Reserved
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    ETHICS IN FINANCE – Case study 1

    Giane Marie, Ibrahim Marrakchi, Hugo Mascaras, Romane Milcent, Arthur Minssie, Alexis
    Noël-Lardin

     Who is to blame the most for the case?

    We believe that the first person who is accountable for this case is Bernie Madoff. Indeed, he
    used both financial tools and techniques of persuasion to achieve his fraud. Using his natural
    charisma and education, he gained the trust of his investors knowing his future intention –
    which relates to the two components of moral responsibility: causality and knowledge. He
    also chose and prepared his plan according to Ponzi schemes, and on his own, at least of
    what the inquiry states, which relates to the last component of moral responsibility,
    freedom.
    Though Bernie Madoff is the one who takes the most the blame, we still believe that the US
    SEC has a quite strong responsibility in this case. Indeed, even if they conducted several
    inquiries on Madoff’s company before the fraud was confessed, they did not uncover the
    fraud before. There were other signs, such as the unusually high return rate, or the fact that
    the administration of the company was not optimal, which leads us even more to say that
    the US SEC is still liable in this case.

     What may be the reasons that the fraud went undetected for so long?

    The main reason why the fraud went undetected for that long is due to the lack of
    professionality of the regulators. Indeed, governmental organizations such as the SEC had
    doubt in Madoff activities since the early 90s, the first investigation took place in 1992, more
    than fifteen years before Madoff confession.

    Moreover, many experienced investors such as banks or insurance have been enrolled in the
    fraud and automatically brought confidence and trust for potential lenders and new entrants
    in this scheme.

     What are possible “red flags” that you should be aware of to detect “Ponzi
    schemes”

    + High returns with little or no risk: Investments with higher risks generate generally if
    everything is okay, higher profits and the opposite is correct. Yet, earning high returns from
    investments with low risks is in most cases very suspicious.
    + No information about the investment strategies
    + Difficulties to receive payment
    + No transparency about the use of the funds

     How can such frauds be prevented in the future ?


    Like history subject, the duty of memory should be applied for financial tragedies like
    Bernard Madoff Ponzi scheme. In fact, we should teach such fraud in school in order to
    avoid the past repeating itself.
    Added to that, financial institutions should put more regulations in place. Indeed, there
    should be more frequent audits, especially among companies that have similarities (high
    cost, low risk...).

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