Robert C. Merton and Myron S. Scholes shared the 1997 Nobel Memorial Prize in Economic Sciences for a "new method to determine the value of derivatives".
The hedge-fund management firm they were on the board of, Long-Term Capital Management (LTCM), was founded in 1994. Initially successful with annualized returns of over 40% (after fees) in its first years, in 1998 it lost $4.6 billion in less than four months following the Russian financial crisis.
This required financial intervention by the Federal Reserve, with a bailout to the tune of $3.6 billion, with the fund finally liquidating and dissolving in early 2000.
Quote source: http://en.wikipedia.org/wiki/Long-Term_Capital_Management
Image source: The Ascent of Money (Documentary). The complete documentary can be seen here.