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. Pyramid Scheme

    An illegal investment scam based on a hierarchical setup. New ...
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. Professionals

    Are Alternative Mutual Funds, ETFs Right for You?

    Alternative mutual fund and ETFs are gaining popularity but are they a good idea for your regular Joe investor?
  7. Investing

    Is the Best Plan for Pot Investing 'Wait-and-see?'

    Legalized marijuana is an emerging industry and those interested in investing in it should proceed with caution.
  8. Investing

    Hedged ETFs That Help You Cushion Currency Impact

    If you’re an investor holding non-U.S. assets, the returns on your investments will be affected when you translate your investment from its local currency
  9. Mutual Funds & ETFs

    Tired Of Mutual Funds? Try This Alternative

    Mirrored investments services are a beneficial alternative to traditional mutual funds. Discover how they work and how they can be used to your advantage.
  10. Home & Auto

    A Soaring Housing Market: College Apartments

    How to play the boom in upscale student housing.

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center