surrou investment will earn or, more formally, the variability of uncertainty to refer to the variability of returns associated returns associated with a given $1,000 government bond that guarantees its holder $5 interest after 30 days has no risk because there is no variability associated with the return. A $1,000 invest- asset. ment in a firm's common stock is very risky because the value of that stock may move up or down substantially over the same 30 days. focus on ETHICS If It Seems Too Good to Be True, It Probably Is in practice For many years, inves- Over the years, suspicions were reported in these statements. However, a tors around the world raised about Madoff. He generated high court ruling only permits claims up to the clamored to invest with Bernard returns year after year, seemingly with difference between the amount an inves- Madoff. Those fortunate enough to very little risk. Madoff credited his com- tor deposited with Madoff and the invest with "Bernie" might not have plex trading strategy for his investment amount the investor withdrew. The judge offs understood his secret trading system, performance, but other investors also ruled that investors who managed to but they were happy with the double- employed similar strategies with much withdraw at least their initial investment digit returns that they earned. Madoff different results than Madoff reported. before the fraud was uncovered are not was well connected, having been the Harry Markopolos went as far as to sub- eligible to recover additional funds. chairman of the board of directors of mit a report to the SEC 3 years prior to Total out-of-pocket cash losses the NASDAQ Stock Market and a Madoff's arrest, titled "The World's Larg- as a result of Madoff's fraud were founding member of the International est Hedge Fund Is a Fraud," that estimated to be $17.5 billion. In early Securities Clearing Corporation. His detailed his concerns. 2013, the Securities Investor Protect credentials seemed to be impeccable. On June 29, 2009, after a lengthy tion Corporation reported that more However, as the old saying goes, if trial and eventual conviction, Madoff than 53 percent of the funds had something sounds too good to be true, it was sentenced to 150 years in prison. either been returned or were in the probably is. Madoff's investors learned Madoff's investors are still working to process of being returned to Madoff's this lesson the hard way when, on recover what they can. Fraudulent defrauded customers. December 11, 2008, the U.S. Securities account statements sent just prior to and Exchange Commission (SEC) Madoff's arrest indicated that investors' What are some hazards of charged Madoff with securities fraud. accounts contained more than $64 bil- allowing investors to pursue claims Madoff's hedge fund, Ascot Partners, lion, in aggregate. Many investors pur- based on their most recent account turned out to be a giant Ponzi scheme. sued claims based on the balance statements? "www.sec.govews/studies/2009/oig-509/exhibit-0293.pdf