Since the financial crisis broke out in mid-September and witnessed the collapse of financial giants, the psychological endurance of Wall Street investors is said to have experienced enough exercise. However, when Bernard Madoff, the legendary former chairman of the board of directors of NASDAQ Stock Market Company, was taken away in handcuffs on June 1 1, which triggered an investment scam that might last for 20 years and reach as high as 50 billion US dollars, Wall Street was still shocked.
The whole story of Madoff's fraud
He used to be a poor Jewish boy in Queens, new york. Half a century ago, he seized the opportunity of the development of American securities industry and became a Wall Street legend from scratch. However, on June 5438+February 1 1 day, 2008, the news that Bernard Madoff, the former chairman of Nasdaq, was suspected of huge fraud shocked Wall Street, and also shocked the investment institutions and individuals who fell into his Ponzi scheme from Europe to Asia.
June, 5438+early February, 2008, Madoff revealed to his son that the customer demanded to redeem the $7 billion investment, which led to his cash flow problems.
65438+February 9 Madoff suddenly said that he would pay dividends in advance.
65438+Feb 10 Madoff confessed to his son that he actually had "nothing" and everything was "just a huge lie".
10 that night, Madoff was accused by his son of detonating the biggest fraud case in history.
65438+February 1 1 Madoff was arrested and cheated of $50 billion.
When you start to be a lifeguard, earn your first bucket of gold.
Bernard Madoff was born in a Jewish family in new york from 65438 to 0938. With the $5,000 earned by working as a lifeguard and installing garden sprinklers, Madoff founded his own Bernard L. Madoff securities investment company at 1960. 1970, his younger brother Peter also joined the company, and his nephew, niece and two sons all worked for him later.
For a long time, this company mainly acted as a middleman between buyers and sellers of stocks. By the early 1980s, this company had become one of the largest independent trading companies in the American securities industry, and by 2000, its assets were about $300 million.
Madoff's company is one of the main promoters of the development of Nasdaq. Madoff was closely related to the National Association of Securities Dealers (NASD), which established the NASD Automatic Quotation System (NASDAQ). As one of the most active companies in NASD, Madoff strongly advocated the electronization of securities trading. 1990, Madoff became the chairman of Nasdaq. He also served as the vice chairman of NASD, a member of NASD's board of directors and chairman of NASD's new york area.
Over the years, Madoff has been committed to promoting transparency and responsibility within Nasdaq. The efforts of Madoff and others have prompted Nasdaq to attract first-class companies such as Apple, SUN and Cisco.
This glorious period won Madoff a high reputation.
James Angel, an associate professor at Georgetown University in Washington, said that Madoff's company was one of the earliest securities companies to realize automation, and Madoff can be regarded as one of the pioneers of modern Wall Street.
Develop and make friends with celebrities and be enthusiastic about charity.
In the 1990s, Madoff began to set foot in the asset management business and founded another asset management investment consulting company.
In new york and Florida, Mr. and Mrs. Madoff are familiar faces in wealthy Jewish circles. Many of his clients come from these wealthy classes. Madoff has been trying to turn his personal network into wealth.
People who know Madoff describe him as "rich" and "high-profile without showing off". He frequented the upper-class clubs in new york and Florida, and from time to time showed his familiarity with insider trading in the stock market by chatting with the rich. Then he used some prominent customer names to attract more customers and expand his influence.
Madoff and his wife Ruth are also famous for their active participation in charity activities. Through the Madoff Family Fund, the Madoffs support theaters, universities and art funds, and they also donate generously to many Jewish charities. In addition, many Democratic politicians have received political donations from Madoff.
In this way, Madoff gradually established his reputation as a "Wall Street wizard". It is said that Madoff's clients were elated by the high return on their investment on the golf course in Florida's upper-class society, and they also joked about Madoff. Is such a high return cheating? Unexpectedly, the joke turned into a prophecy.
Deceive an insider to cover everything up.
Over the years, Madoff's claimed investment record has been very successful. Sustained high income is an important factor for Madoff's scam to last for many years.
He never explained his investment methods, nor how he used investors' funds to get returns. No matter whether the market is good or bad, he can pay more than 10% return on investment every year. He once said: "This is produced through an appropriate investment strategy, and I can't explain it in detail." Sometimes he simply answers with "inside information".
An investor is very satisfied with Madoff's return on investment for many years. He said, "Even a well-informed person can't really see what he is doing. The only thing I know is that he is always full of cash. "
It is said that Madoff also told his clients: "If you invest in me, you can't tell anyone. What happened here has nothing to do with anyone. "
Over the years, external analysts have also been worried about Madoff's company. 1999, financial analyst Harry Kyle poros complained to the US Securities and Exchange Commission that they should investigate Madoff because Madoff claimed that the profits could not be obtained through legal channels, but the US Securities and Exchange Commission did not pay enough attention to this.
Another investment expert, Charles Gradant, also noticed this. He pointed out that it is impossible for a securities investment company to lose money for only three or four months in the long period of 10 or 15.
In fact, Madoff used a very simple "Ponzi scheme", that is, using the money of new investors to pay old investors. This move made thousands of investors, including hedge funds, banks and wealthy individuals, victims of Madoff. And this may also become the biggest fraud case in Wall Street history.
Deciphering Madoff's scam:
Using new investors' money to pay old investors' returns will soon make ends meet due to lack of fresh blood, and the scam will eventually be exposed.
"Inside information"-Madoff conquered many institutional investors in the United States and Europe by these words.
Four tricks of Madoff's scam:
1. Use luxury places to build a personal network.
70-year-old Madoff has been immersed in capital management for many years. He founded Bernard l Madoff investment securities company on 1960. Over the years, through the company's secret fund management branch, Mai used a wide range of contacts to defraud investment. Madoff weaved networks in cities such as Dallas, Chicago, Boston and Minneapolis, and used luxury places such as golf clubs and cocktail parties to contact investors.
2. Establish the reputation of "investing and earning"
After establishing a network of contacts, Madoff began to establish a "word of mouth" for investment. The Wall Street Journal reported that Maxwell's "financing" in Peak Golf Club and Oak Ridge Club in Hopkins, Minnesota alone exceeded $654.38 billion. "When you play golf or have lunch at a golf club, everyone is talking about how Madoff helps them make money," an investor who asked not to be named told the Wall Street Journal. "Everyone wants to join (Madoff's project)."
3. Develop a "pyramid-shaped downline"
Madoff used friends, family and business partners to develop "offline", and some people got commissions for successful "attracting investment". Some "downlines" have developed new "downlines". Spring, a securities analyst, invested 1 1 million dollars in Maxwell's fund, accounting for 95% of its net assets. He also attracted dozens of "off-line" students, including ordinary teachers who invested $50,000 and entrepreneurs who spent millions of dollars.
The reasonable rate of return deceived everyone.
It is reported that Madoff's monthly investment report to customers shows that he is very enterprising and customers can redeem their investment at any time within a few days. Moreover, compared with the unreasonable high return of ordinary fraud cases, Madoff assured customers that the annual return was only about 10%, which made many suspicious customers afraid to cheat.
Impact: Multinational financial institutions suffered heavy losses.
In addition to the United States, Maxwell's fraud also affected financial and investment institutions in Britain, France, Switzerland, Spain and Japan. The Wall Street Journal reported that Bramdin Company in Britain invested more than 9% of its total assets in Madoff Fund. Benedikt Hench Bank, headquartered in Geneva, suffered a loss of $47.5 million due to Macquarie Fund.
Spanish media reported that the Spanish financial giant Santander suffered heavy losses due to Madoff's fraud, and the losses of Spanish investors may reach $3 billion. The Geneva Times reported that the Swiss financial industry may lose $5 billion due to the Mai case. Among them, the joint private finance company, which mainly manages hedge funds, may lose $654.38 billion.
Five elements of Madoff's scam
1. Audited by an unknown accounting firm. It is reported that this company has only three partners, a secretary and an accountant.
2. The investment strategy is obscure. No one knows what Madoff's strategy of "splitting and reforming" is.
3. Technical deception. On the surface, it claims that the company uses "cutting-edge technology", but refuses to let customers check their accounts online.
Family members control key positions. Madoff Securities is a family monopoly company, and its younger brother, nephew, niece and son all hold important positions in the company.
5. Violation of the principle of isolation control. All the transactions of the company are arranged by Madoff, who manages assets and reports assets at the same time.
The Madoff case affected the whole world;
corporate deficit
Golden Gate Asset Management Company $3.5 billion
Bank of Santander, Spain, 365.438 billion US dollars
Access international consulting company 65.438+0.4 billion dollars.
HSBC Holdings US$ 654.38 billion+US$ 0 billion
Swiss private banking union $850 million
BNP Paribas $468 million
Fixed asset management company $400 million
Reichmuth Bank of Switzerland $327 million
Japan Nomura Securities $302 million
Mark Siam Asset Management Company, US$ 280 million.
Societe Generale13.3 million USD.