Bernie Madoff committed the largest investment fraud in American History. Since the beginning of his fraud in 1960 until he was arrested in 2008, Bernie Madoff stole an estimated $65 billion from over 40,000 people in 125 countries (MartyCNBC1, 2021). This fraud was completed using a simple Ponzi scheme, where purported returns are paid to investors from money received from new investors. As with most fraud crimes, Bernie started out with only a handful of investors at a small investment firm he started (Albrecht et al., 2019).

In review of the fraud triangle, it is evident that Bernie had perceived pressures, perceived opportunities and rationalized his fraud in similar ways to other less notorious fraudsters (Albrecht et al., 2019). Bernie Madoff had the perceived pressure of greed. The funny thing about greed, it can be blinding (more on this later). As the pressure to grow his wealth intensified, he looked for opportunities amongst the wealthy elite in New York City. His perceived opportunity developed at the small investment firm he started. This is where he was introduced to clients desperately looking for large returns. When Bernie began promising, and showing annual returns of 15-20%, more people began to invest with Bernie. As he was known to deliver on his promised returns, attention to his small investment company increased and the opportunities grew. As Bernie continued to beat the market, wealthy people around the globe began to invest with his company. Bernie's opportunities continued to grow by promising such fantastic returns, and almost none of the investors questioned him. To rationalize the fraud, Bernie thought that everyone was greedy, and therefore he was taking a stand for the little guy. This is how Bernie rationalized the fraud as acceptable.

The pyramid scheme lasted for nearly 40 years - an unprecedented amount of time for a fraud of this nature (MartyCNBC1, 2021). The fraud was permitted to continue for such a long period of time because of greed. Yes, greed. Not the greed of Bernie, but the greed of the investors. The investors were greedy and as a result, believed the unbelievable. Greedy investors throughout the world, never questioned or did any research into the fraud that was sold to them. Why? Because they too were greedy and wanted returns that nobody else could provide. This greed perpetuated the fraud by allowing new money to flow into Bernie's company and pay returns for investors. Another reason the fraud continued for so long was because nobody questioned Bernie. And of course, nobody did question him because they enjoyed the returns. Because payments were sent to investors (along with phony investment statements), there was never a reason for an investor to suspect anything was illegitimate. Who would question a company that sends payments/statements to them including expected (high) returns? Finally, Bernie was the Director at NASDAQ for three years. Investors believed his high returns were the direct result of his knowledge of the markets and financial wizardry. Everyone was happy to recommend Bernie, which allowed continuous cash flow in, allowing payments to go out.

Investors in Bernie's Ponzi scheme certainly hold some responsibility in detecting the fraud. As previously mentioned, investors blinded by greed never questioned the returns they were achieving. This was particularly obvious when the market was down, but the statements Bernie sent out still reflected the promised returns. Investors should have been thoughtful enough to inquire in more detail, and with appropriate governing agencies to make certain Bernie was not a fraud. Just because someone holds or held a prestigious position in an organization does not guarantee they will not perpetrate the crime of fraud. In the case of Bernie, being the Director of NASDAQ allowed him the opportunity to commit fraud. Anyone is capable of fraud, and Bernie was no exception. This is demonstrated by the three legs of the fraud triangle (Albrecht et al., 2019).

Thankfully Bernie Madoff was caught, unfortunately not soon enough for the 40,000 victims worldwide. Bernie was caught after telling his sons (Mark and Andrew) about the fraud he was committing (MartyCNBC1, 2021). His sons immediately contacted the SEC and reported what their father had told them. The SEC quickly investigated the allegations and arrested him the following morning. Though Bernie's sons were not involved in the fraud, they were both wrought with guilt over the fraud committed against so many unsuspecting victims. Both sons were also victims of Bernie's fraud and paid dearly for their association with their dad.

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