The Madoff Affair
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Bernie Madoff was a popular investor who was well respected and had several high positions including the highest position on the nasdaq
He ran his own fund and for the first couple of years – he was making tons of money for his investors by legitimate means. Month after month they were making huge profits, although they were often unrealized gains. *(meaning the money was still in their account and not actually withdrawn)
Eventually he became very popular and everyone wanted to invest in his funds and try to make the same huge profits as his early investors. But Bernie realized it is much harder to make those same huge profits when you are trading hundreds of millions of dollars and he could not continue to make huge profits to satisfy investors at the same pace.
So he started making fake receipts to make it look like the profits were still coming in at a high rate…..and when investors asked to cash out he paid them their requested cash outs. This went on for years. He made fake receipts, and made it look like everyone was making tons of profits, and he kept thinking any day now he would have huge profits again and no one would ever find out the profits were all fake. Until more and more people started asking questions and suddenly the new investors stopped coming in and he started running out of money to pay off the investors asking to cash out. He did a lot of tricks to keep the trick going as long as he could but eventually he got caught and went to jail.
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