Madoff investment scandal Madoff investment scandal The Madoff investment scandal was a major case of stock and securities fraud discovered in late 2008. In December of that year, Bernard Madoff, the former NASDAQ Chairman and founder of the Wall Street firm Bernard L. Madoff Investment Securities LLC, admitted that the wealth management arm of his business was an elaborate Ponzi scheme. Madoff founded the Wall Street firm Bernard L. Madoff Investment Securities LLC in 1960, and was its chairman until his arrest. The firm employed Madoff's brother Peter as senior managing director and chief compliance officer, Peter's daughter Shana Madoff as rules and
Pyramid scheme the sense that both pyramid and Ponzi schemes are forms of financial fraud. However, pyramid schemes are based on network marketing, where each part of the pyramid takes a piece of the pie / benefits, forwarding the money to the top of the pyramid. They fail simply because there aren't sufficient people. Ponzi schemes, on the other hand, are based on the principle of "Robbing Peter to pay Paul"—early investors are paid their returns through the proceeds of investments by later investors. In other words, one central person (or entity) in the middle taking money from one person, keeping part