Horrific Hedge Fund Scandals: The 4 Biggest

The night was cold, dark, and stormy. It was a wintry December evening all the way back in 2008, when Bernie Madoff was finally arrested after decades of defrauding investors in one of the most elaborate Ponzi schemes known to man.

Bone-chilling Bernie convinced thousands of trusting investors to part with their hard-earned cash with an enthusiastic promise of consistent high returns. The perilous plot thickens as we learn that Bernie was in fact taking money from his constant crowd of new investors to pay off the originals.

Rinse and repeat for over 20 years and you’ve got yourself a high-profile Ponzi Scheme that would impress Charles Ponzi himself. By 2009 Bernie had been sentenced to 150 years in prison, eventually dying after serving only 12 years at the ripe old age of  82.

A doomed tale of icky insider trading, Galleon Group’s heyday saw it managing billions of dollars in AUM as one of the largest hedge fund management companies in the world.

The spooky story goes that Galleon fund manager Rag Rajaratnam heard a whisper about Warren Buffet’s planned investment in Goldman Sachs, and bought thousands of shares before the information was publicly disclosed.

Although he made around $900,000 from the illicit decision, the twisted tale takes a turn for the worse with fund manager Rajaratnam later arrested and charged with 14 counts of securities fraud and conspiracy.

Sentenced to 11 years in prison, Raj served 7 before heading back to life in the Upper East Side in 2019.

A shocking tale of surviving a sordid insider trading scandal, main character Steven Cohen miraculously avoided a prison sentence after years of SEC investigation into his company, SAC Capital.

Although a number of employees were convicted of conspiracy and securities fraud, Cohen himself was not. SAC Capital did eventually pay a beastly billion dollar fine to settle a civil suit filed against the company.

A billionaire to this day, Cohen is now the founder and CEO of a new hedge fund, Point72 Asset Management.

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Allegedly considered to be one of the largest hedge funds in the world, Pequot Capital Management was founded in 1998 by Arthur Samberg, and eventually managed over $15 billion in assets.

As the spooky story goes, Pequot traded Microsoft shares based on insider information from former Microsoft employee David Zilkha.

After a long SEC investigation into insider trading, sneaky Samberg eventually agreed to a settlement of $28 million and the creepy case was closed.

Happy Halloween! Learn more about the history of Wall Street and history of hedge funds