Long-Term Capital Management was a large US hedge fund specialising in building up large geared positions across several markets, financed via loans from numerous US and European financial institutions. LTCM sought to exploit imperfections in the market. The success of the strategy depended on a number of assumptions concerning the underlying market correlations and volatilities.
However, with the Nobel Prize winners Myron Scholes and Robert Merton on board things could not go wrong! Nevertheless, they did. The underlying assumptions proved not to be valid in the face of turbulent market conditions, and in 1998 LTCM folded after losing 4.6 billion dollars in less than four months.