Bernard Madoff, it has been alleged, ran a $50bn Ponzi scheme (named after Charles Ponzi, who emigrated to the United States from Italy in 1903). If found guilty, this is will be the biggest Ponzi / pyramid scheme in history. The SEC described it as a "fraud of epic proportions".
US hedge fund Tremont Group Holdings, had a reported $3.1bn exposure to Madoff.
The idea of a Ponzi scheme is to pay high returns by passing subscriptions in to existing clients rather than putting them into a portfolio, a strategy that results either in complete collapse or bailout.
Madoff claimed he was using a "split strike conversion" strategy to generate his returns. In fact he was faking his trades in an IBM AS/400 computer. Madoff also ran a London operation MSIL, or Madoff Securities International Limited. Madoff was an ex-non-executive chairman of Nasdaq.
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