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 FAQS
  1. How can I calculate the Macaulay duration of a zero-coupon bond?

    The funds from operations is a measure of the amount of cash flow that a business's operations generates. Real estate investment ... Read Full Answer >>
  2. What are the advantages of hiring a third-party marketing company?

    Hiring a third-party marketing company's services offers a number of advantages for businesses - primarily savings, since ... Read Full Answer >>
  3. What risks are associated with a closed end investment?

    A closed-end fund is an investment instrument that is listed on an exchange and trades much like common stock shares. Its ... Read Full Answer >>
  4. Can an investor use leveraged ETFs to invest in the airline sector?

    As of 2015, there are no leveraged exchange-traded funds (ETFs) available to track the airline industry within the transportation ... Read Full Answer >>
  5. What's the difference between a collateralized mortgage obligation (CMO) and a mortgage-backed ...

    A mortgage-backed security, or MBS, and a collateralized mortgage obligation, or CMO, are different types of asset-backed ... Read Full Answer >>
  6. Who are the most famous people convicted of insider trading?

    In finance, insider trading refers to the buying and selling of security by a person who has access to material non-public ... Read Full Answer >>
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. Mutual Funds & ETFs

    Top Skills Hedge Funds Look For In Job Candidates

    Lucrative salary, high perks, and best quantitative brains at work. What are the top skills a candidate needs to get a job at a hedge fund?
  7. Mutual Funds & ETFs

    Why Hedge Fund Managers Make Good Advisory Clients

    Super-busy hedge fund managers should be viewed as an opportunity for sophisticated financial advisors who can step in and offer their services.
  8. Professionals

    A Look at How the Ultra-Wealthy Invest

    Ultra-wealthy investors are cautious this year as they approach the markets. Many target mutual funds and stocks, but most also diversify their portfolios.
  9. Investing

    Should You Buy Marijuana Stock?

    The legalization of marijuana has created a new investment niche: pot stocks.
  10. Economics

    Understanding Money Laundering

    The process of creating the appearance that large amounts of money obtained from serious crimes actually originated from a legitimate source.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center