Bernard Madoff

AAA

DEFINITION of 'Bernard Madoff'

The former chairman of the Nasdaq and founder of the market-making firm Bernard L. Madoff Investment Securities. Madoff, who also ran a hedge fund, was arrested on December 11, 2008, for running an alleged Ponzi scheme; his hedge fund lost about $50 billion, but kept it hidden by paying out earlier investors with money from later investors.

INVESTOPEDIA EXPLAINS 'Bernard Madoff'

According to the U.S. Attorney's criminal complaint against him, Madoff was arrested after telling senior employees at his firm that "it's all just one big lie ... basically, a giant Ponzi scheme."

With consistent returns of 1-1.5% per month for more than 10 years, it was hard for investors not to believe the lines used to sell Madoff's hedge fund. The fund's supposed strategy was to use a proprietary option collar strategy that was meant to minimize volatility. This was provided as the reason for the fund's consistent returns.

VIDEO

Loading the player...
RELATED TERMS
  1. Sir Allen Stanford

    A former banker that is under investigation for securities fraud ...
  2. Ponzi Mania

    The seemingly sudden recognition of Ponzi schemes following the ...
  3. Mini Madoff

    Financial con men that are accused of or have commited crimes ...
  4. Caveat Emptor

    A Latin phrase for "let the buyer beware." The term is primarily ...
  5. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with ...
  6. ZZZZ Best

    A company owned by Barry Minkow in the 1980s. Through such means ...
Related Articles
  1. Economics

    Online Investment Scams Tutorial

    To bamboozle someone out of their money is an age-old ruse. Learn about some of the gimmicks modern-day swindlers use and avoid becoming a statistic.
  2. Active Trading

    What Is A Pyramid Scheme?

    The FTC announced it had opened an official investigation of Herbalife, which has been accused of running a pyramid scheme. But what exactly does that mean?
  3. Brokers

    How To Avoid Falling Prey To The Next Madoff Scam

    Due diligence does work, but the loose reporting standards for hedge funds make extra care and attention necessary.
  4. Entrepreneurship

    Ivar Kreuger: Businessman Or Scam Artist?

    Match monopolist Ivar Kreuger started as a brilliant businessman, but his high-flying lifestyle led to some shady dealings.
  5. Retirement

    The Ghouls And Monsters On Wall Street

    Learn about some of the creepiest cases of fraud and the characters behind them.
  6. Investing

    What's an Agency Problem?

    An agency problem occurs when a conflict of interest arises for an agent -- a person acting on behalf of another person. The conflict of interest arises when the agent’s own interests are different ...
  7. Investing Basics

    The Dodd-Frank Wall Street Reform Act

    The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly called Dodd-Frank, was passed in 2010. The goal of the act is to prevent another great recession like that of 2008, which ...
  8. Investing Basics

    What Is Cold Storage For Bitcoin And Why Does It Matter?

    With increasing incidents of hacking in the world of digital currency, cold storage offers a safe place for the cryptocurrency owners.
  9. Mutual Funds & ETFs

    These 4 Precious Metals ETFs Help Combat Inflation

    A look at 4 precious metal ETFs to combat inflation when it hits.
  10. Stock Analysis

    A New Economic Threat: State-Sponsored Hacking

    State sponsored hacking attempts are becoming a major cause of concern to the US. Here is a list of US sectors most vulnerable to state-sponsored hacking.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center