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[answered] 12/10/2016 Ponzi Scheme KHALED NATHAN SANDEEP TING WAI PHL


I need to write around 3 to 4 pages on the different theories such as Utilitarianism vs.?Individualism vs.?Kantianism vs. Vertue Theory and relating it to the ethics of Ponzi Schemes. I have attached my group paper to show you what my project topic is about.?


12/10/2016 Ponzi Scheme KHALED

 

NATHAN

 

SANDEEP

 

TING

 

WAI PHL 2100 90293 Business Ethics

 

Kevin V. Daley, Esq. Ponzi Scheme

 

Introduction

 

People think about the Wall street as financial companies and hedge

 

funds that will give you a returned investment. People are told that

 

the Wall Street will offer low risks and high investment returns, so

 

they trust in investing in companies. This is not true because many

 

clients fall victim into investing in a Ponzi Scheme, where they lost

 

all their money. Ponzi schemes are investment frauds that offer high

 

returns for investors without them knowing that other investors fund

 

the returns. These schemes are run by a central operator that uses

 

the money from investors to pay off the returns of the older

 

investors. These types of unethical frauds are the reason people

 

suffer through loss of their money and this causes a burden in the

 

investor?s lives. In this essay, we will be explaining the difference

 

between a person that believes in Individualism and a person that

 

believes in Utilitarianism would have reacted in a Ponzi scheme

 

situation as the culprit. We will also be explaining different

 

examples of times when Ponzi Schemes were used in our world. Individualism

 

Individualism focuses on the individual himself, so it

 

depends on the individual?s goals and beliefs. This type of thinking

 

promotes the individual?s self-interests and does not listen to any

 

other people or groups. As an individualist, the culprit would have

 

thought that he was doing the right thing as he is trying to

 

maximize his profits to help his own business to grow and become a

 

success. Friedman defines individualism to have an obligation to

 

maximize profits for the owner or the stockholders of a business. We

 

could argue that in a Ponzi scheme, the owner is trying to cheat the

 

stockholders of their money so they are losing money and their

 

profits are not being maximized. Ponzi schemes will also bring the

 

owner to gain millions from their investors so, on the other hand,

 

the owner is maximizing his own profits. An individualist would have

 

thought that he was doing the right thing by using a Ponzi scheme

 

because they are putting themselves as a priority and maximizing their own profits.

 

Utilitarianism

 

Utilitarianism is to think in a moral way, to make sure that your actions are morally right and benefiting all the people involved. They

 

would put the happiness of everyone involved to be their top priority. In a

 

Ponzi scheme, the culprit is not thinking to benefit anyone that is involved

 

but himself so we can say that he is against utilitarianism. The culprit only

 

wants the money of his investors and does not care if they benefit from the process so he is the only one happy at the end. By not thinking the

 

utilitarianism way, the culprits end up being caught and sent to jail for

 

thinking only for his oneself. William Miller

 

The first Ponzi scheme can be dated back to 1899, when the Franklin

 

Syndicate was Established. This Syndicate was led by William Miller, a 21year-old low level Wall street worker who was not successful at making

 

money in the stock market. William ?520 percent? Miller, as he soon became

 

known as, began taking investments from his Sunday school friends and

 

promising a high rate of return (10% weekly), assuring them that he had an

 

?inside pull? on Wall Street. Eventually Miller, after his ploy began to take on

 

momentum, took on two partners and started and advertising in Newspapers

 

around the country. People became so infatuated with the idea of becoming

 

rich fast that by the end of 1899 Miller and his two partners had 12,000

 

investors and $60,000 worth of investments coming in daily. They later

 

thought of another scheme to destroy incriminating evidence against Miller.

 

Because William Miller's name was on all the receipts, The Franklin Syndicate

 

wanted to take those out of circulation so they promised investors an even

 

better opportunity where in exchange for every dollar invested along with

 

the receipt clients were to receive stock certificates in Millers Corporation

 

with an even higher promised rate or return. Later in the 1920?s a similar scam was pulled by Charles Ponzi and this type of scam became named after

 

him. Bernard Madoff Largest Accounting Fraud in History

 

Through his business started in 1960, Bernard L. Madoff Investment Securities LLC hedge fund, he operated the largest Ponzi scheme that has

 

ever been uncovered. In 2008, that scheme finally caught up with him.

 

Depending on the source, the scheme has been estimated to be ripping

 

investors off for approximately 40 years. Madoff convinced investors that

 

they were investing in fund that promised high returns with low risk involved.

 

In the end, Madoff had dug himself too big of a hole and couldn?t climb his

 

way out.

 

In 2008, financial crisis struck the US which had investors becoming

 

more conservative. Madoff could no longer support his ?One big lie?. In order

 

for his scheme to continue to function, the system needs a continuous flow

 

of new investors to support the previous investors and provide them with

 

?gains?. ?Redemption requests for $7 billion, by investors looking to pull

 

back from turbulent stock markets, forced Mr. Madoff to admit that his

 

coffers were empty?bearing out Warren Buffett's adage that only when the

 

tide goes out is it clear who was swimming naked.? (The Economist 2008)

 

Madoff allegedly cheated about 8,000 investors in his scheme of somewhere

 

between $15 billion and $65 billion. The exact figure varies with the source.

 

He operated over a span of 40 years, paying off those who sought to cash

 

out with funds secured from new clients, and he sent regular statements to

 

investors detailing their holdings and their illusory high level of profits. (Geis

 

2013)

 

There were many red flags whom which Harry Markopoulos made

 

obvious to the SEC. Although, the red flags were true and apparently obvious

 

the SEC continued to ignore Harry?s claims for several years. Some of the red

 

flags Markopoulos identifies include; Split-Strike Conversion, Market Timing,

 

Cheaper to Borrow, Giving Up Profits, Secrecy and Performance Line Had a

 

45-Degree Angle. These red flags should have been enough for the attention

 

of the SEC to investigate Bernie Madoff?s wealth management business. How was the fraud perpetrated?

 

The scale of the investment Ponzi scheme perpetrated by Bernie Madoff is hard to pinpoint with any accuracy. There are likely many investors

 

who will never come forward about their losses for a many of reasons. We

 

are left to estimate the total losses, but $65 billion was the total showing on investor statements at the time the fraud was stopped. However, this

 

number includes the fake ?gains? that had accumulated on the money. The

 

$18 billion number is tagged as actual cash input into the Bernie Madoff

 

Ponzi scheme by investors, and in the end the true total loss. (Coenen 2010) Ponzi Scheme

 

A ?Ponzi Scheme? is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates

 

returns for older investors by acquiring new investors. This scam actually

 

yields the promised returns to earlier investors, as long as there are more

 

new investors. These schemes usually collapse on themselves when the new

 

investments stop. (Investopedia)The Ponzi scam is named after Charles

 

Ponzi, a clerk in Boston who first became famous for orchestrating such a

 

scheme in 1919. Although Charles Ponzi wasn?t the first to use the scheme,

 

he was the first to make it infamous. (Investopedia) Gerald Payne

 

Gerald Payne, is one of the Greater Ministries International Church

 

have been sentenced to long prison terms. He took $500 Million from 18,000

 

Christians investors, who believed god would double their money. He was

 

sentenced to 27 years for his conviction on 19 counts of fraud, conspiracy,

 

money-laundering, and related charges. His wife, Betty Payne, was also

 

involved, received 12 years and 7 months. Gerald Payne ran the Greater Ministries church in Florida and

 

throughout the 1990?s. He ran an investment scheme under the guise of a

 

gifting program that used religious text to support its claims. Investors were

 

told they would double their money in less than 18 months from investments

 

the church had in gold, silver, and debts. However, the investments never

 

made any profits and most failed completely. To keep the scheme going, they

 

paid previous investors from the new investors. Those running the scheme

 

inside the church received large monthly commissions. Payne was cashing

 

hundreds of checks for just under the $10,000 reporting limit, which caught

 

the eye of the IRS. When investigators traced their way to the checking

 

account he shared with his wife, Betty, it has nearly $20 Million.

 

In march 2001 five Greater Ministry leaders, including Gerald Payne

 

and his wife Betty Payne, were arrested. When the Payne was prosecuted,

 

Gerald said that the money has been gifted, not invested. The couple later

 

claimed that their First Amendment Rights as a church were being violated.

 

When they were found guilty of felonies, Gerald received 27 years in prison

 

and Betty twelve and a half. Allen Stanford

 

Allen Stanford is a former prominent financier, a chairman of Stanford

 

Financial Group of Companies and the sponsor of professional sports. Allen Stanford is convicted of 13 out of 14 counts of fraud that his investment

 

company was massive Ponzi Scheme that lasted more than two decades

 

involving more than $7 billion in investments.

 

In 1980?s he started a bank naming it ?Stanford International Bank in

 

Antigua?. Later he was accused of defrauding nearly 30,000 investors

 

involving $7 billion from around 113 countries in Ponzi Scheme in fraudulent

 

high-interest certificates of deposit at his bank ?Stanford Intl Bank?. Stanford

 

was imprisoned in 2009 however, a series of lawyers delayed the case by

 

arguing that he couldn?t stand for the trial as a result of prison beating. After

 

surgery and while still in Federal Custody, Stanford became addicted to

 

prescription drugs therefore, allowed him to undergo drug treatment.

 

However, his attorneys claimed that he was suffering from amnesia and

 

could remember nothing before the 2009 assault. Finally, on the January 23rd

 

the trails were began over the defense?s objections. The jury found Stanford

 

guilty on thirteen counts including mail and wire fraud, obstructing the

 

Securities and Exchange Commission investigation, soliciting funds under

 

false pretenses, misappropriating funds for personal use including

 

conspiracy.

 

The Stanford?s fraud is the second biggest Ponzi Scheme in American History

 

compared to Bernie Madoff?s $65-billion scam. However, Stanford?s fraud is

 

considered to be the biggest as it involved 30,000 investors and spent

 

million dollars on himself financing helicopters, private jets, cricket

 

tournaments, gambling trips to Vegas and a lavish lifestyle of Yachts. Bibliography

 

http://www.dailyfinance.com/2010/04/13/fraud-files-with-madoff-there-were-many-red-flags

 

http://www.investopedia.com/terms/p/ponzischeme.asp

 

http://www.fraud-magazine.com/article.aspx?id=4294977160

 

http://money.howstuffworks.com/ponzi-scheme.htm

 

http://money.howstuffworks.com/ponzi-scheme5.htm

 

https://www.moneysmart.gov.au/scams/investment-scams/ponzi-schemes

 

http://www.nytimes.com/2012/03/07/business/jury-convicts-stanford-in-7-billion-ponzifraud.html

 

https://www.theguardian.com/world/2012/jan/22/jury-allen-stanford-trial

 

http://www.cnbc.com/id/46630391

 

http://globalnews.ca/news/2485794/the-biggest-ponzi-schemes-stanford-vs-madoff/

 

https://en.wikipedia.org/wiki/Allen_Stanford

 

http://www.sec.gov/answers/ponzi.htm

 

http://www.investopedia.com/terms/p/ponzischeme.asp?lgl=no-infinite

 

http://www.christianitytoday.com/ct/2001/october1/15.21.html

 

http://content.time.com/time/specials/packages/article/0,28804,2104982_2104983_2105004

 

,00.html

 

https://culteducation.com/group/949-greater-ministries-international/8977-couplesentenced-in-massive-nationwide-ponzi-scheme.html http://www.nytimes.com/2012/03/07/business/jury-convicts-stanford-in-7-billion-ponzifraud.html

 

https://www.theguardian.com/world/2012/jan/22/jury-allen-stanford-trial

 

http://www.cnbc.com/id/46630391

 

http://globalnews.ca/news/2485794/the-biggest-ponzi-schemes-stanford-vs-madoff/

 

https://en.wikipedia.org/wiki/Allen_Stanford

 


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