Whenever the term ‘crime’ is mentioned, people quickly have mental images of dead bodies lying somewhere after the murder. However, violent crimes are not the only types of crimes. There are top people in government or in the company that devise schemes for siphoning money into their accounts, and such actions are treated as serious crimes although they are nonviolent. Such crimes are described as white collar crimes (Friedrichs, 2009). Other forms of white-collar crimes include the theft, defrauding of credit cards and insider trading. Such crimes are non-violent, but they have dire consequences on the individual and the economy at large. One of the most historical examples of the white crime is the scheme of Bernie Madoff of which this paper focuses. The goal of the paper intensively discusses the definition of the white color crimes, their forms and the exposition of Bernie Madoff’s crime and correlate it to white collar crimes.

In simple terms, white collar crimes are the non-violent crimes that are committed either directly or directly with the intention of financial gain. Besides the above named, others include the embezzlement, tax evasion, and even money laundering. Taking a more in-depth look into each of these forms of white color crimes help us to categorize the crime committed by Madoff accurately. First, corporate fraud is one of the types of fraud that the FBI pursue and it manifest itself as insider trading and other schemes that target at concealing the fraud activities carried out as well as impeding the regulating bodies such as Securities and Exchange Commission from carrying out scrutiny (Friedrichs, 2009). Embezzlement is also another form of white-collar crime. It involves the misappropriation of the funds entrusted by an employer or by another person. An example is the channeling of company funds into a personal account by an employee or when a politician selfishly spends the campaign’s funds. Third, Ponzi schemes derive their name from Charles Ponzi that made over $250k through mail coupon fraud (Friedrichs, 2009).

Ponzi schemes are white collar crimes that promise the investors a huge return with little or no risk at all. The pioneers of the scheme drum up their efforts to attract new investors with the aim of paying the old ones and the scheme crumbles down when the new customers cease to join, and the flow of the new investment comes to an end. Extortion is a type of blackmail for financial gain when individual forces an institution or a person to either give up their properties or money otherwise adverse consequences follows. It may involve gangs that force store owners to pay for protection or a hacker blackmailing a victim into paying a certain amount of money to keep them from tarnishing their names by releasing their private data to the public.

White collar crime also manifests itself as bankruptcy fraud where a person burdened by debt fills for bankruptcy to relieve themselves of the debt. The relief is achieved at the expense of creditors. Such actions happen when the person hides their property when filling the bankruptcy paper. Additionally, some perpetrators commit the crime of avoiding the payment of taxes. This happens by filling the tax forms with false information. Lastly, money laundering is another category of white collar crimes. It involves the acquisition of illegal money and filtering it through a series of transactions to make it appear legitimate (Smith, 2010). The process is commonly referred to as cleaning of money. It involves first, depositing of the money into financial institutions. An example of the institution is a bank. The money is cleaned through a series of transactions to erase the layers of traceability. The laundered money is finally integrated with legally obtained money either through the sales or purchase of assets.

In order to determine the best category that the case of Madoff falls into, it is imperative to have background information about it. Bernard Madoff is the former chairperson of the NASDAQ stock exchange. He founded the stock investment firm in the 60s (Smith, 2010). Later on, in 2008, he was charged with defrauding the investors’ amount not less than $50. He was charged with running the largest Ponzi scheme that the US has not recorded in over two decades before.

Madoff was prisoned for 150 years for running a Ponzi scheme. Madoff was a respected financier and therefore convinced many investors to hand over their saving with a promise of huge profits in return. By so doing, Madoff was charged with over ten counts of fraud, theft and even money laundering (Lewis, 2017). Madoff succeeds in his plan by devising a Ponzi scheme where he guaranteed high returns. He took after Charles Ponzi that promised half returns on investment to investors only within three months.

The central operation of the Ponzi schemes is to be run by a middle individual who use money from the new investors to compensate benefits promised to initial investors. This method makes the structure to appear profitable and legitimate although in a real sense no profit is made. The central operator ultimately pockets the extra money (Lewis, 2017). The investors are discouraged from making quick withdrawal of their profits so that they can stay long and make more profit. The investment methodology is always fake and not based on any business algorithm. The methodology is spoken merely out to protect the business. Another characteristic of the Ponzi schemes is that they are not very sustainable. They run short and fall apart after some time. The operator hits on the money of the investors and runs. Secondly, when the new investors are hard to find, the cash flow dwindles and if the investors withdrawal their investments and profits it signals danger to the business.

In the case of Bernard Madoff, a similar scenario hit is Ponzi scheme. In 2008, the economy of the US meltdown and many people found themselves in the scramble to liquidate funds within accounts. The investors of Madoffs were not exceptional since they came out calling for their money, but he could fulfill his promises (Lewis, 2017). Due to pressure, Madoff admitted that the investment structure was a fraudulent scheme and a lot of the investors had their cash sink with the scheme. The Ponzi scheme crumbled when the economy turned sour, and the clients of Madoff requested a total of around $7 billion in the form of returns, and it was unfortunate that Madoff had approximately $300 million left (Lewis, 2017). The scheme profited Madoff, and he managed to remain in the dark for a decade since he was well versed and active in the financial industry. He had a long history in the stock market since the 60s and had won the trust of investors. From the scheme, Madoff made off with around $20 billion although it was reported that he cheated around $65 billion.

Due to his exemplary reputation in the financial arena, Madoff didn’t struggle to bring investors into his scheme. His reputation attracted to him investors from all directions and trusted him with their funds. His investors comprised a charitable organization that was funded by Steven Spielberg and the owners of the ‘New York Mets’ (Smith, 2010). All these including the Spanish bank Banco Santander, HSBC, and the Korean Teachers Pension were some of the victims of the scam of Madoff. The fraud had a dire effect to an extent some of the victims have never recovered up to date.

However, the Madoff didn’t end here. The Ponzi scheme he had drafted was made up of his family members, and they were all paid justly by the law. His sons, Andrew and Mark, run a business that was indirectly connected to his scheme (Lewis, 2017). They were both investigated and not charged though. Unfortunately, Mark committed suicide later on while Madoff was sentenced 150-year imprisonment of which he serves until today (Smith, 2010). Fortunately, Bernard’s wife was set free and left with $2.5 million.

From the overview of the scheme adopted by Bernard Madoff, his crime qualifies to be a white-collar crime. It takes different forms of white color crimes. First, its primary structure is a Ponzi scheme that aimed at stealing from investors with the promise of huge profits in return. In conclusion, Madoff managed to orchestrate one of the historic Ponzi schemes. Just like any other scheme, he promised investors huge returns without much toil (Smith, 2010). Besides that, his business lacked any verified model upon which it was operating. It is the feature of the Ponzi scheme to distract with big numbers which in real business the deal doesn’t add water. Although most of the Ponzi schemes discourage investors from withdrawing, Madoff’s was different. It was reasonably easy to make withdrawals, and therefore, it proved itself legit to the eyes of the investors. Other Ponzi schemes discourage their investors from making withdrawals for higher profits as time progresses.

It was only after the falling apart of his scheme that his investors realized that they had flushed their money down the drain. Some of his associates were investigated and arrested while his son, Mark committed suicide. The scheme of Madoff should leave an indelible mark in the minds of every investor and those desiring to do investment. The scheme should teach the investors that a Ponzi scheme can be configured to appear legit and therefore, it is imperative to be vigilant and look out for scams. Madoff was one of the legit engineers of a Ponzi scheme that even received praise from the Wall Street investors before it failed the test of time. Therefore, as an investor, it is crucial to before investing in looking at the holdings of a fund and verifying that the performance is in synchronism with the activities of the stock market (Smith, 2010). Although the unclearly defined model of a business may signal a scam, it is essential to be aware that a scheme is always carefully crafted. For this reason, keen attention needs to be paid before channeling to any business that claims to reward profitably and turn out to be the resurrection of the Madoff-like business.

References

Friedrichs, D. O. (2009). Trusted criminals: White collar crime in contemporary society. Cengage Learning.

Smith, F. (2010). Madoff Ponzi Scheme Exposes the Myth of the Sophisticated Investor. U. Balt. L. Rev., 40, 215.

Lewis, L. S. (2017). Con Game: Bernard Madoff and His Victims. Routledge.