Bernard Madoff ran the largest Ponzi scheme in history, defrauding thousands of investors out of $50 billion. The SEC failed to uncover the fraud despite numerous red flags and warnings about Madoff's operations. An investigation by the SEC Inspector General found major mismanagement in how the SEC handled its investigations of Madoff, including a lack of supervision, failure to verify information from third parties, and inadequate sharing of information between SEC departments. The SEC has acknowledged problems with its enforcement procedures that allowed Madoff's scheme to continue operating undetected for years.

2. By: Peter Costello
 December 11, 2008 (SEC, 2009)
 Largest Ponzi Scheme in History
(Santoso)
 $50 Billion (Altman)
Altman/ Time
Bernard Madoff: Ponzi Scheme

3. Charles Ponzi
What Is a Ponzi Scheme?
Altman/ Time

4. Madoff‟s Ponzi Scheme
Davemanuel.co
m
Lipstick Building
Home of BMIS
Johnson/Mimoa.eu SEC, 2009

5. “My 80 year old mother just lost her husband six
months ago, and now every penny that she had as a
result of investing with Madoff” (Strober 49).
“There are many of us who loved and respected
Bernie and he has stolen EVERYTHING from us. I
can‟t believe he was a monster, but I will never
forgive him for stealing my family‟s money (Strober
49).
Victims

6. Bandler/CNNMoney
The Man Who Knew

7. “Red Flags”
The option trading that Madoff was using is very expensive. In order to get the
rate that he promised investors he would need to pick stocks that would get a
return of 16% per year. Mathematically that was is impossible given the financial
conditions at the time (The 1997 Asian Currency Crises, the 1998 Russian
Debt/LTCM crises, and the 2000-2002 killer bear market) (SEC, 2005).
Madoff did not allow outside performance audits (SEC, 2005).
Red Flag #5
Red Flag
#17
“Red Flags”

8. Touryalai/Forbes
SEC

9. Wall
street
David Kotz
Wiens/The Project On Government Oversight
SEC Mismanaged

10. Enforcement staff are not always aware of where to find information
regarding impartiality (SEC 2009, 17).
Program priorities are not always clearly established and communicated to
enforcement staff. (SEC 2009, 19).
Case handling processes could be improved (SEC 2009,
22).
Enforcement staff expressed concern over working
relationships
within the divisions (SEC 2009, 25).
Finding 9A
Finding 9B
Finding 9C
Finding 9D
Findings

11. Finding 1
Enforcement staff did not conduct a thorough review of a
complaint brought to their attention regarding Madoff
(SEC 2009, 4).
Finding 4
Enforcement staff did not always seek assistance from
other divisions and offices during the Madoff
investigation (SEC 2009, 9).
SEC Mismanagement of Madoff
Case

12. SEC Mismanagement of Madoff caseFinding 5
In addition to a lack of experience with investigating
Ponzi schemes, the Madoff investigation suffered from
a lack of supervision (SEC 2009, 12).
Finding 6
The Enforcement staff working on the Madoff
investigation failed to verify information provided
by Madoff through the use of independent third-
party sources (SEC 2009, 14).
SEC Mismanagement of Madoff Case

13. "This was like a mini-Madoff. They had six solid
months of warnings. They could have done
something” (Taibbi 4)
Mini-Madoff
Stuyvesant/RSS Main

14. Putting It All Together
 Check the numbers
 The SEC is not perfect

15. Works Cited
Altman, Alex. “A Brief History of Ponzi Schmes”. Time. 15 December 2008. Web.
Bandler, James. “Madoff Hunter: „He‟s the Lowest Form of Scum‟” CNNMoney. Cable News Network, 25
Feb. 2010. Web. 07 May 2013.
“Bernard Madoff arrested by FBI.” YouTube. 15 Dec. 2008. YouTube. 21 April, 201
http://www.youtube.com/watach?v=WmetYHNhm8A
“Bernard Madoff Made Off With As Much as 50 Billion Dollars in the Fraud.” DaveManuel.com. N.p., 14
Dec. 2008. Web. 07 May 2013.
Gregorious, Greg N., and Francis-Serge Lhabitant. “Madoff: A Flock Of Red Flags.” Journal of Wealth
Management 12.1
(2009): 89-97. Business Source Complete. Web. 21 April, 2013.
Johnson, Deborah H. (Deborah Hart), and Gerald S Strober. Catastrophe: The Story of Bernard Madoff, the Man
Who
Swindled the World. Beverly Hills, CA: Phoenix Books, 2009.

16. Works Cited (cont.)
“The Man Who Knew.” CBSNews. CBS Interactive. 21 April, 2013
http://www.cbsnews.com/video/watch/?id=5088137n
Santoso, Alex. “9 Most Brazen Ponzi Schemes in History.” Neatorama. 22 Dec. 2008. 21 April, 2013
http://www.neatorama.com/2008/12/22/9-most-brazen-ponzi-schemes-in-history/
Stuyvesant, Stanley. “Did Lehman Brothers Sign Portend Its Collapse?” RSS Main. N.p., 15 Sept. 2008. Web. 08
May
2013
Taibbi, Matt. “Why isn‟t Wall Street in Jail?” Rolling Stone. 16 February 2011. Web.
Touryalai, Halah. “SEC Shuts Down ZeekRewards, Calling It $600 Million Ponzi Scheme.” Forbes. Forbes
Magazine, 17 Aug. 2012. Web. 07 May 2013

17. Works Cited (Cont.)
United States. Securities and Exchange Commission. Office of Audits. Program Improvements Needed Within
the SEC‟s Division of Enforcement. Washington, D.C.: U.S. Securities and Exchange. 29 September, 2009.
United States. Securities and Exchange Commission. The World‟s Largest Hedge Fund is a Fraud.
Washington, D.C.:
U.S. Securities and Exchange, Madoff Exhibits. 7 November, 2005.
Wiens, Jake. “The Project on Government Oversight (POGO) Blog.” ‘The Project On Government Oversight
(POGO) Blog’
N.p., 30 April 2012. Web. 07 May 2013.