first student- Itzel 

 1) Bernie Madoff, a well-known financer in Wall Street, founded Bernard L. Madoff Investment Securities LLC.   The company created by Madoff became to be one of the largest penny stock brokerage and wealth management firms.  (CFI, 2020).

Madoff’s brokerage was very successful, and this part of the company was not used for the scheme.  The wealth management section was used for the scheme, and it attracted investors easy because it promised high returns to their investments.  The more people he attracted to invest, the easier to use the money from later investors to pay the return to the first investors.  The company also created fake statements. (CFI, 2020).

The problems became real when investors requesting their investments and returns totaling about $7 billion.  The firm didn’t have that amount of money and at that moment and the investigations started resulting in Madoff stole the money of the investors and did not invest any (CFI, 2020).

2) Money is a driving force for those that want more and more.  Those that had the funds to invest did it because of the high returns offered without investigating and comparing why other companies did not offered anything close to what Madoff offered.   The ambition to have more prevailed over security.

3)The regulatory agencies failed to investigate Madoff and his company even when they receive a tip from an investigator because Madoff used his knowledge of Wall Street and knew what actions he had to avoid preventing creating red flags for the regulatory agencies (Moyer, L. 2009).  The regulatory agencies claimed that they didn’t have the resources, a divided oversight, and lack of coordination among agencies. 

4) Frauds like Madoff’s ponzi scheme when undetected can get so big that when discovered can affect investors in private and government disrupting the way business are run.  The other consequence is that investors, small and large, stop trusting regulatory agencies and the government and this in result can create a general dissatisfaction affecting an entire country’s economy and different levels of the government (Monroe, H., Carvajal, A., Pattillo, C., 2010).

Monroe, H., Carvajal, A., Pattillo, C. (2010).  Perils of Ponzis.  https://www.imf.org/external/pubs/ft/fandd/2010/03/monroe.htm

Moyer, L. (2009).  How Regulators Missed Maddof.  Forbes.  https://www.forbes.com/2009/01/27/bernard-madoff-sec-business-wall-street_0127_regulators.html?sh=1a3b75e85c28

CFI (2020).  Bernie Madoff.  https://corporatefinanceinstitute.com/resources/knowledge/other/bernie-madoff/

second student- Adrian 

Elizabeth Holmes raised hundreds of millions of dollars from investors on the promise that her medical-testing startup Theranos would change medicine with a single drop of blood. On Wednesday, share market regulators called the executive once hailed as the Steve Jobs of biotechnology a fraud and forced her to give up the company she built” (Robinson & Spaulding, 2018). Theranos was a company that was to supposedly develop a medical technology that could run thousands of medical tests using the blood from a finger-prick and do so quickly and cheaply while processing about 90% of the same test as standard lab equipment. The Theranos scandal involving Elizabeth Holmes and Ramesh Balwani surrounded Elizabeth Holmes and the former President of Theranos, Ramesh Balwani, lying for years about technology they supposedly owned, hindering the media, and using publicity to get investors to hand more than nearly $880 million USD to keep the company Theranos up and running. After being caught, Ms. Holmes was ordered to pay a $500,000 USD fine, surrender 19 million shares and was barred from being an officer or director of a public company for 10 years. Balwani, has yet to be formerly charged. (Robinson & Spaulding, 2018)

The Theranos story is an important lesson for Silicon Valley. Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday." , said Jina Choi, director of the SEC's San Francisco Regional Office (Robinson & Spaulding, 2018). Human nature is capable of many things both good and bad. This case shows negativity towards human nature. It shows that it can be in someone’s human nature to be deceiving, nonchalant, and sneaky. It is not normalized in society to intentionally hurt others whether physically, verbally, mentally, or in this case financially. On the other hand, you have the regulatory agencies who also fell short. This type of fraud possibly went undetected so long for numerous reasons. The first being simply, no one seemed to investigate the company, seeking informative facts. Secondly, it seems obvious that Holmes and Balwani were able to identify loopholes in the laws set forth by the Security and Exchange Commission, SEC. Thirdly, due to how deceiving Holmes and Balwani presented Theranos to investors, allowed room for upper supervisory agencies to not second guess malpractices. As for consumer confidence, with this type of fraud, it is destroyed. Chances of upcoming pharmaceutical companies will be unjustly scrutinized to ensure no loop holes or deceptive information is being passed, consumers will be hesitant to purchase products, and investors will be hesitant to invest and will need over-proof of forecasted events, changes, and successes.

REFERENCE Robinson, M., & Spaulding, R. (2018, March 14). Blood, fraud and money led to Theranos CEOs fall from grace. Retrieved September 17, 2020, from https://www.smh.com.au/business/companies/blood-fraud-and-money-led-to-theranos-ceo-s-fallfrom-grace-20180315-p4z4f8.html.