Career

Legitimate career Bernie Madoff got his first job working as a life guard and sprinkler installer. With the $5,000 ($37,000 in current dollar terms) he earned, Madoff started Bernard L. Madoff Investment Securities LLC. The firm started as a penny stock trader in 1960 and by 2008 became the sixth largest market maker on Wall Street. It was chaired by Madoff from its startup until Madoff's arrest in 2008. The firm used information technology to compete with other firms by making automated quotes which saved money. This technology and the creativity and forward thinking behind it was one of the reasons that people initially invested with Madoff's company. Another reason why people invested with Madoff was because he claimed to have lots of government connections. The technology that the firm helped develop became the NASDAQ. NASDAQ stands for National Association of Securities Dealers Automated Quotations. The firm also had an investment advisory division that was not publicized. This became a large part of the fraud investigation against Madoff. Madoff was "the first prominent practitioner" of payment for order flow, in which a dealer pays a broker for the right to execute a customer's order.Even though Bernard L. Madoff Investment Securities LLC started as a legal firm it didn't stay that way. Eventually Madoff's firm turned into a massive $50 billion ponzi scheme. What Is a Ponzi Scheme? After a couple years of legitimate investment dealings Bernie Madoff began his ponzi scheme. A ponzi scheme is an illegal investment plan where existing investors are paid with the money from newer investors. For example if group A contained 5 people investing one hundred dollars each. In a month's time group B would come along containing 10 people investing one hundred dollars each. Then group B's one thousand dollars is used to pay the five investors from group A which means that each member of group A would get double their original investment making them think that they made a lot of money when they were really just given group B's money. This can go on for years with group C's money being used to pay group B and group D's money being used to pay group C. Eventually the scheme will end due to one or more of the following reasons. There will stop being a flow of new investors, the scheme will collapse on itself, or the scheme will be exposed. In the Madoff's case the scheme ended becasue it was exposed by Harry Markopolos. Markopolos started his career as a broker on wall street and later became a fraud examiner. The ponzi scheme got it's name from Charles Ponzi who pioneered this type of scheme. Top to bottom: Charles Ponzi, Harry Markopolos

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