Can Better Financial Regulation Prevent Investors from Being Defrauded?
Chapter 4: Bernard Madoff and the ‘mother of all Ponzi schemes’
History’s largest Ponzi scheme illustrates the ability of a Ponzi scheme, for an extended period, to deceive both individual and institutional investors and escape regulatory detection. There are some question marks about the scale of the losses and the time span of the operation. According to the trustee, Irving Picard, seeking to recoup money for the over 13 000 listed account holders in the Madoff fraud, about $36 billion went into the scheme, with $18 billion paid out before the collapse3 and $18 billion missing (Sarna, 2010, p. 147). If promised returns are included, based on the detailed monthly statements and balances that Madoff sent to clients, along with details of securities and transactions, the losses totalled $64.8 billion. In fact, while transactions were listed on the statements, the trustee handling the liquidation (Irving Picard) could find no evidence that any securities had been bought for clients in the final 13 years of the scheme’s operation. A matter overlooked in other accounts is that these figures demonstrate how difficult it is to measure the ‘scale’ of a Ponzi scheme, and some of these intricacies have emerged in the Madoff litigation (Strumpf, 2013).
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.