Question

Why did Madoff fail? [Select all that apply]

1. The market was so bad that people needed their money.

2. Madoff was not able to attract new money.

3. The SEC required Madoff to be registered

4. The exchange rate on the internationally investments was too high.

Answer 1

Answer: 1. The market was so bad that people needed their money 2. Madoff was not able to attract new money.

Rationale: The reason why the business of Bernie Madoff began to crumble is due to the global financial crisis in 2007-2008. It was called the "general market downturn" and most of the investors wanted to withdraw their money. Bernie Madoff, however, didn't have the funds since he was running a Ponzi scheme.

According to the Madoff scandal, the investors wanted $7 billion and Madoff's firm had only $300 million. Madoff usually paid off investors' returns by attracting new money but this time Madoff was not able to get new investors since it was a huge sum and the market situation was bad.

Option 3 and 4 are not the causes of Bernie Madoff's failure. The SEC had failed to notice the Ponzi scheme run by Madoff and the exchange rate had nothing to do with Madoff being caught or his failure.