Bernard Madoff was famously caught in one of the biggest frauds in U.S. history. He perpetrated the management of funds where existing investors' returns were paid using new investors' funds rather than from legitimate investments in the stock or bond markets. This type of fraud is known as

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The type of fraud described in the question is known as a Ponzi scheme, which is when returns for earlier investors are paid using the money from newer investors, rather than coming from legitimate investments. This type of fraud is named after Charles Ponzi, who famously perpetrated a similar scam in the early 20th century. Neither of the other options presented in the question are accurate descriptions of this type of fraud.

Bernard Madoff Was Famously Caught in One of the Biggest