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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 $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.

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