Ex-Nasdaq Chair Arrested in Fraud Scheme

Bernard Madoff, the former chairman of the Nasdaq stock exchange, has been arrested amid allegations he orchestrated a $50 billion Ponzi scheme.

According to The Wall Street Journal, at the beginning of 2008 Madoff Investment Securities LLC had $17 billion under management.  The firm is known for its business in market-making and managing money for high-net-worth individuals, hedge funds and other institutions, according to the report.

Reportedly, Madoff lost inventor money, and then paid certain investors returns with principal received from different investors.  In other words, he had negative returns but told investors he actually had positive returns.  In order to pay the phony positive returns, Madoff allegedly used fresh capital from new investors.

His scheme started crashing when the firm, like many other money management firms, saw a slew of redemption requests following the recent market turmoil.

In addition to the potential havoc wreaked on hedge funds and other investors that gave Madoff money, the news may shake the confidence of the market as investors worry that there could be more cases of fraud to come.