Considered as the Charles Ponzi of the modern era, investment advisor Bernie Madoff became famous (in a bad way) for committing the same white collar crime that Ponzi did back then. In 2008, the court found him guilty of 11 federal counts of fraud, including money laundering and false filings.
Embezzlement is a serious crime that involves millions of assets. According to David A. Nachtigall, the penalties for cases like this “vary depending on the type of charge that is filed and whether the case is filed in state or federal court”. In Madoff’s case, the court sentenced him to 150 years in prison.
Understand Due Diligence
As bad as this case was, there are still bits of lessons that you can get out of it. One of which is due diligence. You must be well familiar with this element and have the ability to carry it out adeptly. Performing adequate due diligence is vital when venturing into any kind of investment.
Trust Your Gut Instincts
Some say that instincts have no place in the financial investment field. But, relying on your senses if you’re skeptical about certain deals is not that illogical. When something doesn’t seem right or in place, don’t be afraid to walk away from the investment no matter how big or substantial it is.
Diversify; Be Open to Options
Even if you really have a good relationship with an investor, you shouldn’t keep all your money in just one manager. Surprisingly, a number of Madoff’s victims had all their money in the hands of the fraud. Work in partnership with several other professionals from companies or firms not related to each other.
It’s Okay to Be Skeptical
People may tag you as a pessimist, but that’s okay. Madoff acquired a majority of his victims through endorsements from other investors. Regardless of who introduced you to an investment adviser, whether it’s your family or friend, don’t be complacent just yet. Make sure you really know him well.
Whenever you strongly feel that you’re in a Ponzi scheme, take out your money immediately. Madoff’s victims got more than their investment’s value, but you wouldn’t want to be in that same grueling situation.