Bernard Madoff

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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.

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