DEFINITION of 'Mini Madoff'

Mini Madoff is a slang term for con men accused of committing financial Ponzi-scheme type crimes similar to those of Bernard (Bernie) Madoff. Mini Madoffs tend to orchestrate Ponzi or pyramid schemes that are similar in nature to Bernie Madoff's, but are smaller in size and notoriety. Bernie Madoff is a famous fraudster who ran an organization called Investment Securities LLC, which was a front for his Ponzi scheme. As opposed to investing his clients' money, he stole it. In order to create the appearance of successful investments, Bernie fabricated investment statements and used money from new investors to pay "returns" to older investors. He was arrested in December of 2008 and sentenced to 150 years in prison.


Mini Madoff is a slang term for a person who has committed or been accused of committing a Ponzi-esque financial crime. Often times in Ponzi schemes, investors are promised unusually high returns in oddly short amounts of time. This is a red flag that a supposed investment opportunity may be a fraud. When new people "invest" their money into the scheme, their money is used to pay off older investors under the guise of "returns." Continuing streams of new investors are needed to continue these fake return streams to older investors. The cycle of illegitimate returns can continue until the pool of investors fails to grow. With all schemes of this nature, eventually the infusion of new money dries up and the hoax unravels. The hallmark of a Ponzi or pyramid scheme is that the returns given out to investors or participants aren't from actual investing or product sales, but are dependent upon new entrants into the scheme. The payments to older investors or participants are mostly or entirely dependent upon the pool of investors or participants continuing to grow since the streams of money from new entrants flow up the pyramid to older entrants.

  1. Ponzi Mania

    Ponzi mania describes the mood of investors after Bernie Madoff's ...
  2. Pyramid Scheme

    A pyramid scheme is an illegal investment scam based on a hierarchical ...
  3. Affinity Fraud

    An affinity fraud is an investment scam in which a con artist ...
  4. Securities Fraud

    Securities fraud is a form of white-collar crime that disguises ...
  5. Payment For Order Flow

    Payment for order flow occurs when a broker compensates another ...
  6. Pyramiding

    Pyramiding is a method of increasing a position size by using ...
Related Articles
  1. Investing

    Bernie Madoff Runs Hot Chocolate Monopoly in Prison

    Not the Onion. Hot cocoa is used as prison currency, and Madoff is shaking people down.
  2. Investing

    Invest Like Madoff - Without The Jail Time

    This Ponzi scammer's professed strategy has been vilified, but it actually works.
  3. Insights

    5 Company Names That Could Damage Your Resume

    These companies have a negative aura around their names that may be detrimental to your application.
  4. Financial Advisor

    10 of the Most Famous Financial Advisors (BRK-A)

    The most famous financial advisors are a mix of legendary investors, best-selling financial authors, celebrity talk show hosts and con men.
  5. Insights

    How to Avoid the Top Financial Advisor Scams

    Investors need to be wary of financial advisor scams. Here are the most common and how you can protected yourself.
  6. Financial Advisor

    4 Investment Mistakes That Will Cost You

    Whether you're just starting out or have been investing for years, mistakes happen. But some of them will cost you big and can easily be avoided.
  7. Small Business

    Multi-Level Marketing

    Learn how to differentiate between a legitimate marketing strategy and a pyramid scheme.
  8. Trading

    Mini Options: A Useful Tool For Trading High-Priced Securities

    Mini options are option contracts wherein the underlying security is 10 shares of a stock or exchange-traded fund (ETF). This is the main difference between mini options and standard options, ...
  9. Tech

    The Three Most Notorious Rogue Traders

    The conviction of former Barclays trader Tom Hayes has once again shone the spotlight on rogue traders. Here are three of them.
  10. Investing

    It's Not Illegal If The Government Does It

    The government allows itself the leeway to do many things that would be illegal for a private citizen or corporation.
  1. These famous scandals demonstrate the agency problem

    The agency problem occurs when agents do not appropriately represent the best interests of principals. Here you'll learn ... Read Answer >>
  2. What is the difference between a Ponzi and a pyramid scheme?

    Pyramid schemes and Ponzi schemes share many similar characteristics in which unsuspecting individuals are fooled by unscrupulous ... Read Answer >>
Trading Center