Bernard Madoff

Loading the player...

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 $65 million Ponzi scheme. His hedge fund lost about $20 billion of his investors' money, but kept it hidden by paying out earlier investors with money from later investors.

BREAKING DOWN 'Bernard Madoff'

On December 10, 2008, Madoff admitted to his sons that he was operating a fraudulent hedge fund. It was his sons who alerted the authorities, leading to his arrest by the FBI.

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.

RELATED TERMS
  1. Mini Madoff

    Financial con men that are accused of or have commited crimes ...
  2. Ponzi Mania

    The seemingly sudden recognition of Ponzi schemes following the ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, ...
  4. Option Income Fund

    A type of mutual fund with the goal to generate current income ...
  5. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...
  6. Hedge Fund Manager

    The individual who oversees and makes decisions about the investments ...
Related Articles
  1. Financial Advisor

    ABC's Madoff Miniseries Explores His Charm, Smarm

    An ABC miniseries on Ponzi scheme king Bernie Madoff gets inside the head of a man who was, in fact, not too big to fail.
  2. Managing Wealth

    Diversity: Your Shield From Madoff-Style Investment Scams

    The best way to prevent being stung in a modern-day Ponzi scheme is diversity - not just within your portfolio, but also in the people who handle your investments.
  3. ETFs & Mutual Funds

    The 3 Biggest Hedge Fund Scandals

    Learn about major scandals at hedge funds including the Madoff investment scandal and insider trading cases at SAC Capital and the Galleon Group.
  4. Markets

    When Will DoJ Release The Madoff Relief Fund?

    The Department of Justice is sitting on a $4 billion relief fund for victims of Ponzi Scheme artist Bernie Madoff. What's taking so long to pay it off?
  5. Insights

    Ackman vs. Madoff: Who's Hurting Hedge Funds More?

    Compare the plights of former and current money managers Bernie Madoff and Bill Ackman and how the actions of both men have affected the status of hedge funds.
  6. Financial Advisor

    The 5 Worst Financial Advisor Scammers of All Time

    A look back at history's five worst financial scams.
  7. Trading

    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.
  8. Investing

    3 Notorious American White Collar Criminals

    Learn about the crimes and punishments of some of the most infamous convicted white-collar crooks.
  9. Financial Advisor

    6 Ways to Avoid an Investment Ponzi Scheme

    Investments that promise high returns with little risk are everyone's dream – but if they could also be a Ponzi scheme. Here's how to protect yourself.
  10. Insights

    The Rise and Fall of Millionaires Gone Bankrupt (SHOO)

    Discover how a person can make millions of dollars and through bad financial decisions, stock losses and other mishaps end up bankrupt.
RELATED FAQS
  1. Can you invest in hedge funds?

  2. What are some famous scandals that demonstrate the agency problem?

    Learn more about the agency problem and find a few famous examples. Find out what contributes to these problems and how investors ... Read Answer >>
  3. What is the purpose of a hedge fund?

    Find out what a hedge fund is, how it is set up and why it is different than other forms of investment partnerships like ... Read Answer >>
  4. What does a hedge fund do?

    Read how hedge funds differ from other investment vehicles and how their investment strategies make them unique and potentially ... Read Answer >>
  5. How do hedge funds use short selling?

    Learn how hedge funds use short selling to profit from stocks that are falling in price. Explore different analytical techniques ... Read Answer >>
  6. What happens if you don't hedge your investments?

    Learn the purpose, advantages and disadvantages of hedging, and find out how to utilize hedging to enhance an overall investment ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center