Ponzi schemes are types of business frauds where an individual obtains finance from one party to pay another through investment. Considerably, Bernard Madoff was charged with scam, allegedly accepted to staff that his giant investments were rooted on the Ponzi scheme. Therefore, this paper is a report that will entirely discuss how the Bernie Madoff Ponzi scheme works. In addition, it will focus on the critical aspects that are significant in establishing this scheme. The report on the Bernie Madoff Ponzi scheme is on auditing a business risk approach.

The scheme works on the basis of promises on large returns as bait. The Ponzi scheme invests through new clients’ investments in the company. However, it is crucial to note that if new recruits or investors are not found, the whole scheme collapses. After the scheme collapses, the new investors lose a lot. The scheme is based on the trust of the investors towards the organization. In Madoff`s case, he was highly respected, an aspect that made him highly successful. Therefore, the scheme substantially relies on respect and trust of both parties. Good reputation also came as a result of establishing the NASDAQ stock exchange (Henriques, 65). He served in this organization from a term as the chairperson. Moreover, in the organization he could advise clients during withdrawal to invest in his investment company.

Considerably, the scheme does not take into account investors with unbelievable returns as in other Ponzi schemers. This is a clear cut to beat other Ponzi schemers and yielded high profits. The scheme thus would grow faster and attract many new investors. The giant scam through intensifying redemptions from scores of other hedge funds would be pressured to liquidate holdings. This would appreciate downward pressure on the product prices. Because of this, the accumulated pressures on the products yield high and the scheme would draw money adequately. The pyramid trade depended on attraction of new investors, otherwise the scheme could collapse. When customer asked for withdrawals, he could make a chase account that had a chase and successor. It would ensure efficient administration of the scheme and avoid collapsing. Foreign transfers and investments secured the company and ensured extra earnings (Sander 76).

In the office, two back officers worked for Madoff, who created incorrect trading reports. These are common means of fraud that are used in the Bernie Madoff Ponzi scheme. The reports were on the returns, which Madoff ordered for each client (Henriques 75). For instance, once Madoff determines the client`s return, one of the office workers could enter a false trade from the previous date. The scheme then enters a false closing trade towards the amount of profit required.

The technology that is used in the Bernie Madoff Ponzi scheme is quite technical. In this scheme, a computer program is designed to manipulate the account statements. It backdates trade time and secures customer justification. This is a vital boost in the scheme that ensures security and efficiency in the trade. Madoff says “I need the capacity to give any settlement date I need”. In addition, returns were allegedly decided before account opening. The officers are, thus, able to make considerable changes and alterations to suit the trade (Henriques 121).

In conclusion, the Bernie Madoff Ponzi scheme run successfully, because it gained customers’ trust and reported moderate returns to clients. Madoff`s investment company got the clients` promptly and thus encouraged more new investors. Therefore, the success of the Ponzi scheme relied on trust, availability of new customers or investors, and level of technology that would manipulate trade reports. The victims of this fraud include hedge funds, wealthy individuals, and banks.