Securities Law Blog

This is a partial list of Bernard Madoff's investors who have reportedly lost money in Madoff's alleged investment scam. While this list of Madoff victims continues to grow every day, some of that "growth" is really simply the ability to obtain refined information about the losses listed below. One thing is very clear, tens of thousands of people will be hurt by this massive investment fraud. Total losses are estimated to be about $50 billion, which would make it the largest Ponzi scheme in history-a shocking securities fraud. This is especially troubling since press reports would lead us to assume that the SEC securities fraud lawyers were not stopping this scam. Where available, the amount estimated to be lost by each investor is included. One of the troubling things to emerge in recent days is the pension funds losses caused by this securities fraud. Endowment funds have also been defrauded by Madoff to the tune of millions of dollars.

*Please note that some of the individuals and charities may have invested through funds, such as Ascot Partners, so there may be some double-counting going on. Also note that these estimates may be very rough ones based on the poor recordkeeping of Madoff.

Madoff investor:Fairfield Sentry (Fairfield Greenwich Group) (Madoff feeder fund)
Investor type:alternatives firm
Potential exposure: $7.5 billion
Source:firm statement

Madoff investor:FIM Ltd. (Kingate funds manager)
Investor type:money manager
Potential exposure:$3.5 billion
Source: media reports

Madoff investor:Grupo Santander
Investor type:bank
Potential exposure:$3.5 billion
Source: El Pais

Madoff investor:Rye Investment Management (Tremont Group) (Madoff feeder fund)
Investor type:hedge fund
Potential exposure:$3.1 billion
Source:Bloomerg News

Madoff investor:Kingate Management (Madoff feeder fund)
Investor type:alternatives firm
Potential exposure:$2.8 billion
Source: Bloomerg

Madoff investor:Bank Medici of Austria
Investor type:bank
Potential exposure:$2.1 billion
Source: Bloomberg

Madoff investor:Ascot Partners (Madoff feeder fund)
Investor type:hedge fund
Potential exposure:$1.8 billion
Source: Wall Street Journal

Madoff investor:Access International Advisors
Investor type:hedge fund
Potential exposure: $1.4 billion
Source: Bloomberg

Madoff investor:Fortis Bank Nederland
Investor type:bank
Potential exposure:$1.35 billion
Source:firm statement

Madoff investor:HSBC
Investor type: bank
Potential exposure:$1 billion
Source:firm statement

Madoff investor:J.P. Jeanneret Associates
Investor type:investment adviser
Potential exposure:$946 million
Source:Syracuse Post-Standard

Madoff investor:Benbassat & Cie
Investor type: bank
Potential exposure:$935 million
Source:Le Temps

Madoff investor:Union Bancaire Privee
Investor type:bank
Potential exposure:$846 million
Source:Le Temps

Madoff investor:Natixis
Investor type: bank
Potential exposure: $600 million
Source: Bloomberg

Madoff investor:Royal Bank of Scotland
Investor type: bank
Potential exposure:$600 million
Source:published reports

Madoff investor:Sterling Equities
Investor type:investment firm
Potential exposure:$500 million
Source:New York Post

Madoff investor:BNP Paribas
Investor type: bank
Potential exposure: $475.3 million
Source: Bloomberg

Madoff investor:BBVA
Investor type: bank
Potential exposure: $404 million
Source: Reuters

Madoff investor:Picower Foundation
Investor type: charity
Potential exposure: $400 million
Source:Boston Globe

Madoff investor:Carl and Ruth Shapiro
Investor type:individuals
Potential exposure:$400 million
Source:WSJ

Madoff investor:RMF (Man Group)
Investor type:alternatives firm
Potential exposure: $360 million
Source:firm statement

Madoff investor:Reichmuth Matterhorn
Investor type: bank
Potential exposure: $330 million
Source: Bloomberg

Madoff investor:Normal Holdings
Investor type:
Potential exposure:$302 million
Source:StreetInsider.com

Madoff investor:Pioneer Alternative Investments
Investor type:alternatives firm
Potential exposure:$280 million
Source: Bloomberg

Madoff investor:Maxam Capital Management (Madoff feeder fund)
Investor type:fund of hedge funds
Potential exposure:$280 million
Source: WSJ

Madoff investor:EIM Group
Investor type: bank
Potential exposure: $230 million
Source:Le Temps

Madoff investor:Ira Rennert
Investor type: individual
Potential exposure: $200 million
Source: FINalternatives

Madoff investor:Bank Austria
Investor type: bank
Potential exposure: $192.1 million
Source: Der Standard

Madoff investor:Tremont Capital Management (Tremont Group)
Investor type:fund of hedge funds
Potential exposure: $190 million
Source: firm statement

Madoff investor:M&B Capital Partners
Investor type: money manager
Potential exposure: $187.9 million
Source: El Mundo

Madoff investor:Jerome Fisher (Nine West founder)
Investor type: individual
Potential exposure: $150 million
Source: media reports

Madoff investor: Carl and Ruth Shapiro Family Foundation
Investor type: charity
Potential exposure: $145 million
Source: Boston Globe

Madoff investor:Yeshiva University
Investor type: university endowment
Potential exposure: $140 million
Source: Bloomberg

Madoff investor:Aozora Bank
Investor type: bank
Potential exposure: $137 million
Source: firm statement

Madoff investor:AXA
Investor type: insurer
Potential exposure: less than $135 million
Source: Reuters

Madoff investor:Credit Mutuel
Investor type: bank
Potential exposure: $124 million
Source: Bloomberg

Madoff investor:Dexia
Investor type: bank
Potential exposure: $106.9 million
Source: firm statement

Madoff investor:UniCredit
Investor type: financial firm
Potential exposure: $100 million
Source: Bloomberg

Madoff investor:Hadassah
Investor type: charity
Potential exposure: $90 million
Source: JTA

Madoff investor:Unione di Banche Italiane
Investor type: bank
Potential exposure: $84.9 million
Source: Bloomberg

Madoff investor:Nordea
Investor type: bank
Potential exposure: $65 million
Source: Reuters

Madoff investor:Hyposwiss
Investor type: bank
Potential exposure: $50 million
Source: Reuters

Madoff investor:Korea Life Insurance Co.
Investor type: insurer
Potential exposure: $50 million
Source: Yonhap News

Madoff investor:Banque Benedict Hentsch
Investor type: bank
Potential exposure: $47.5 million
Source: firm statement

Madoff investor:Royal Dutch Shell
Investor type: pension
Potential exposure: $45 million
Source: Reuters

Madoff investor:Great Eastern Holdings
Investor type: bank
Potential exposure: $43.9 million
Source: Reuters

Madoff investor:Town of Fairfield, Conn.
Investor type: pension fund
Potential exposure: $42 million
Source: Associated Press

Madoff investor:Royal Bank of Canada
Investor type: bank
Potential exposure: $40.4 million
Source: Globe and Mail

Madoff investor:Wolosoff Foundation
Investor type: charity
Potential exposure: $38 million
Source: FINalternatives

Madoff investor:Bramdean Asset Management
Investor type: alternatives firm
Potential exposure: $31 million
Source: WSJ

Madoff investor:family of Sarah Chew
Investor type: family office
Potential exposure: $30 million
Source: Time

Madoff investor: Mortimer B. Zuckerman Charitable Remainder Trust (New York Daily News owner's charity)
Investor type: charity
Potential exposure: $30 million
Source: CNBC

Madoff investor:Arthur I. and Sydelle F. Meyer Charitable Foundation
Investor type: charity
Potential exposure: $29.2 million
Source: Palm Beach Post

Madoff investor:Sumitomo Life Insurance Co.
Investor type: insurer
Potential exposure: $22 million
Source: Bloomberg

Madoff investor: Tufts University
Investor type: college endowment
Potential exposure: $20 million
Source: Boston Globe

Madoff investor:Los Angeles Jewish Community Foundation
Investor type: charity
Potential exposure: $18 million
Source: Jewish Journal

Madoff investor:KSM Capital Advisors
Investor type: investment firm
Potential exposure: $15 million
Source: Indianapolis Business Journal

Madoff investor:The Phoenix Holdings
Investor type: insurer
Potential exposure: $15 million
Source: firm statement

Madoff investor:Harel Insurance Investments and Financial Services
Investor type: insurer
Potential exposure: $14.2 million
Source: firm statement

Madoff investor:Alicia Koplowitz
Investor type: individual
Potential exposure: $13.7 million
Source: Europa Press

Madoff investor: Groupama
Investor type: insurer
Potential exposure: $13.6 million
Source: firm statement

Madoff investor: Societe General
Investor type: financial institution
Potential exposure: less than $13.5 million
Source: Reuters

Madoff investor: Baloise
Investor type: insurer
Potential exposure: $13 million
Source: Reuters

Madoff investor: Lautenberg Family Foundation
Investor type: charity
Potential exposure: $12.8 million
Source: media reports

Madoff investor: Kas Bank
Investor type: bank
Potential exposure: $12.3 million
Source: firm statement

Madoff investor: Massachusetts Pension Reserves Investment Management
Investor type: pension
Potential exposure: $12 million
Source: Reuters

Madoff investor: Mitsubishi UFJ FInancial Group
Investor type: financial institution
Potential exposure: $11 million
Source: Bloomberg

Madoff investor: Richard Spring
Investor type: individual
Potential exposure: $11 million
Source: WSJ

Madoff investor: Hampshire County Council
Investor type: pension
Potential exposure: $10.7 million
Source: IPE

Madoff investor: RAB Capital
Investor type: hedge fund
Potential exposure: $10 million
Source: Reuters

Madoff investor: Richard Roth
Investor type: individual
Potential exposure: $10 million
Source: FINalternatives

Madoff investor:United Jewish Endowment Fund
Investor type: charity
Potential exposure: less than $10 million
Source: JTA

Madoff investor: Korea Teachers Pension
Investor type: pension
Potential exposure: $9.1 million
Source: statement

Madoff investor: Robert I. Lappin Charitable Foundation
Investor type: charity
Potential exposure: $8 million
Source: Washington Post

Madoff investor: Michael Roth
Investor type: individual
Potential exposure: $7.5 million
Source: FINalternatives

Madoff investor:Chais Family Foundation
Investor type: charity
Potential exposure: $7 million
Source: WSJ

Madoff investor: Jewish Federation of Greater Los Angeles
Investor type: charity
Potential exposure: $6.4 million
Source: media reports

Madoff investor: Technion-Israel Institute of Technology
Investor type: university
Potential exposure: $6.4 million
Source: Globes

Madoff investor: Vincent Tchenguiz
Investor type: individual
Potential exposure: $6.3 million
Source: FINalternatives

Madoff investor: The Ramaz School
Investor type: school
Potential exposure: $6 million
Source: FINalternatives

Madoff investor: Irwin Kellner (named plaintiff on first lawsuit against Madoff)
Investor type: individual
Potential exposure: $6 million
Source: lawsuit

Madoff investor: Julian J. Levitt Foundation
Investor type: charity
Potential exposure: $6 million
Source: WSJ

Madoff investor: Stony Brook University Foundation
Investor type: university endowment
Potential exposure: $5.4 million
Source: Bloomberg

Madoff investor:David Berger
Investor type: individual
Potential exposure: $5 million
Source: FINalternatives

Madoff investor: Maimonides School (Boston)
Investor type: school
Potential exposure: $5 million
Source: Bloomberg

Madoff investor: Neue Privat Bank
Investor type: bank
Potential exposure: $5 million
Source: Bloomberg

Madoff investor: North Shore-Long Island Jewish Health System
Investor type: pension fund
Potential exposure: $5 million
Source: statement

Madoff investor: Congregation Kehilath Jeshurun (New York)
Investor type: synagogue
Potential exposure: $3.5 million
Source: Bloomberg

Madoff investor: Dorset County Pension Fund
Investor type: pension
Potential exposure: $3.5 million
Source: LocalGov.co.uk

Madoff investor:Caja Madrid
Investor type: bank
Potential exposure: $3.1 million
Source: Cinco Días

Madoff investor:Merseyside Pension Fund
Investor type: pension
Potential exposure: $3 million
Source: media reports

Madoff investor: New York Law School
Investor type: law school
Potential exposure: $3 million
Source: lawsuit

Madoff investor: Roger Peskin
Investor type: individual
Potential exposure: $3 million
Source: AP

Madoff investor: Swiss Reinsurance Co.
Investor type: reinsurer
Potential exposure: less than $3 million
Source: firm statement

Madoff investor:Global Specialised Opportunities 1
Investor type: Bermuda-listed fund
Potential exposure: $2.8 million
Source: fund statement

Madoff investor: Banca March
Investor type: bank
Potential exposure: $2.7 million
Source: Cinco Días

Madoff investor: American Friends of Yad Sarah
Investor type: charity
Potential exposure: $1.5 million
Source: JTA

Madoff investor:Caisse des dépôts et consignations
Investor type: government-owned bank
Potential exposure: $1.38 million
Source: Bloomberg

Madoff investor: Robert and Sarah Chew
Investor type: individual
Potential exposure: $1.2 million
Source: Time

Madoff investor: SAR Academy (New York)
Investor type: school
Potential exposure: $1.2 million
Source: Bloomberg News

Madoff investor: Harold Roitenberg
Investor type: individual
Potential exposure: $1 million
Source: Minneapolis Star-Tribune

Madoff investor: Ira Roth
Investor type: individual
Potential exposure: $1 million
Source: WSJ

Madoff investor: Arnold and Joan Sinkin
Investor type: individuals
Potential exposure: $1 million
Source: The Guardian

Madoff investor: Steven Abbott
Investor type: individual
Potential exposure: less than $1 million
Source: WSJ

Madoff investor:Allegretto Fund
Investor type: hedge fund
Potential exposure: $790,000
Source: firm statement

Madoff investor:Clal Insurance
Investor type: insurer
Potential exposure: $778,800
Source: firm statement

Madoff investor: Mediobanca
Investor type: bank
Potential exposure: $671,000
Source: firm statement

Madoff investor: Allianz Global Investors
Investor type: bank
Potential exposure: n/a
Source: Citywire

Madoff investor: Austin Capital Management
Investor type: fund of hedge funds
Potential exposure: n/a
Source: Reuters

Madoff investor: AWD
Investor type: financial services provider
Potential exposure: n/a
Source: Citywire

Madoff investor: Banco Popolare
Investor type: bank
Potential exposure: n/a
Source: MarketWatch

Madoff investor: Banesto
Investor type: bank
Potential exposure: n/a
Source: Reuters

Madoff investor: Ed Blumenfeld (Long Island real estate developer)
Investor type: individual
Potential exposure: n/a
Source: Long Island Business News

Madoff investor: Norman Braman (former Philadelphia Eagles owner)
Investor type: individual
Potential exposure: n/a
Source: WSJ

Madoff investor: Chair Family Foundation
Investor type: charity
Potential exposure: n/a
Source: FINalternatives

Madoff investor:Engelbardt family
Investor type: family office
Potential exposure: n/a
Source: Variety

Madoff investor: Erste Bank
Investor type: bank
Potential exposure: n/a
Source: Der Standard

Madoff investor:Fair Food Foundation
Investor type: charity
Potential exposure: n/a
Source: Crain's Detroit Business

Madoff investor: Leonard Feinstein (Bed Bath & Beyond co-founder)
Investor type: individual
Potential exposure: n/a
Source: Newark Star-Ledger

Madoff investor: Stephen Fine
Investor type: individual
Potential exposure: n/a
Source: Reuters

Madoff investor: Barbara Flood
Investor type: individual
Potential exposure: n/a
Source: National Public Radio

Madoff investor: Foundation for Humanity (Elie Wiesel's charity)
Investor type: charity
Potential exposure: n/a
Source: WSJ

Madoff investor:Avram and Carol Goldberg (Stop n Shop founders)
Investor type: individuals
Potential exposure: n/a
Source: Reuters

Madoff investor: Joyce Z. Greenberg
Investor type: individuals
Potential exposure: n/a
Source: Houston Chronicle

Madoff investor: Gutmann
Investor type: bank
Potential exposure: n/a
Source: Citywire

Madoff investor: members of the Hillcrest Country Club (St. Paul, Minn.)
Investor type: individuals
Potential exposure: n/a
Source: Star-Tribune

Madoff investor: JEHT Foundation
Investor type: charity
Potential exposure: n/a
Source: statement

Madoff investor: KBC
Investor type: bank
Potential exposure: n/a
Source: firm statement

Madoff investor: Knowsley MBC
Investor type: pension
Potential exposure: n/a
Source: LocalGov.co.uk

Madoff investor: Kenneth and Jeanne Levy-Church (donors to Fair Food and JEHT foundations)
Investor type: individuals
Potential exposure: n/a
Source: Jewish Journal

Madoff investor: Leonard Litwin
Investor type: individual
Potential exposure: n/a
Source: Bloomberg

Madoff investor: Liverpool City Council
Investor type: pension
Potential exposure: n/a
Source: LocalGov.co.uk

Madoff investor: LLBW
Investor type: bank
Potential exposure: n/a
Source: Citywire

Madoff investor: Loeb family
Investor type: family office
Potential exposure: n/a
Source: CNBC

Madoff investor: Mirabaud & Cie
Investor type: bank
Potential exposure: n/a
Source: Le Temps

Madoff investor: The Moriah Fund
Investor type: charity
Potential exposure: n/a
Source: FINalternatives

Madoff investor: MorseLife
Investor type: charity
Potential exposure: n/a
Source: Palm Beach Post

Madoff investor: Nomura
Investor type: bank
Potential exposure: n/a
Source: WSJ

Madoff investor:Notz, Stucki & Cie
Investor type: bank
Potential exposure: n/a
Source: Le Temps

Madoff investor:members of the Oak Ridge Country Club (Hopkins, Minn.)
Investor type: individuals
Potential exposure: n/a
Source: Star-Tribune

Madoff investor: Optimal Investment Services (Grupo Santander)
Investor type: alternatives firm
Potential exposure:n/a
Source: Bloomerg

Madoff investor: Palm Beach Country Club
Investor type: country club
Potential exposure:n/a
Source: CNBC

Madoff investor:Eric Roth (screenwriter)
Investor type: individual
Potential exposure:n/a
Source: Los Angeles Times

Madoff investor: St. Helens MBC
Investor type: pension
Potential exposure:n/a
Source: LocalGov.co.uk

Madoff investor: Sefton MBC
Investor type: pension
Potential exposure:n/a
Source: LocalGov.co.uk

Madoff investor:SNL Reaal Groep
Investor type:financial services firm
Potential exposure: n/a
Source: Bloomberg

Madoff investor: family of former New York Gov. Eliot Spitzer
Investor type: individuals
Potential exposure: n/a
Source: Clusterstock.com

Madoff investor: Thema (Madoff feeder fund)
Investor type: hedge fund
Potential exposure:n/a
Source: media reports

Madoff investor: Jeff Tucker (Stone Bridge horse farm owner, Fairfield Greenwich Group founding partner)
Investor type: individual
Potential exposure: n/a
Source: WNYT television

Madoff investor:Thyssen family
Investor type:family office
Potential exposure: n/a
Source:Clusterstock.com

Madoff investor:UBS
Investor type: bank
Potential exposure: n/a
Source: Reuters

Madoff investor:Lawrence Velvel (dean, Massachusetts Law School)
Investor type: individual
Potential exposure: n/a
Source: WSJ

Madoff investor:Wilpon family (New York Mets owner)
Investor type: family office
Potential exposure: n/a
Source: WSJ

Madoff investor:Wunderkinder Foundation (Steven Spielberg's charity)
Investor type:charity
Potential exposure:n/a
Source: WSJ

In an unprecedented Press Release (at least I have never seen one like this), SEC Chairman Cox notes his “grave concern” due to the the fact that “credible” complaints about Madoff were ignored for years at the SEC. The full text follows:

SEC Statement Regarding Madoff Investigation

FOR IMMEDIATE RELEASE
2008-297

Washington, D.C., Dec. 16, 2008 — Securities and Exchange Commission Chairman Christopher Cox issued the following statement today concerning its ongoing investigation in the case of SEC v. Madoff:

Since the Commission first took emergency action against Bernard Madoff and his firm, Bernard L. Madoff Investment Securities, LLC on Thursday, December 11, every necessary resource at the SEC has been dedicated to pursuing the investigation, protecting customer assets and holding both Mr. Madoff and others who may have been involved accountable.

SEC investigators are currently working with the trustee and other law enforcement agencies to review vast amounts of records and information involving Mr. Madoff and his firm. Those records are increasingly exposing the complicated steps that Mr. Madoff took to deceive investors, the public and regulators. Although the information I can share regarding an ongoing investigation is limited, progress to date indicates that Mr. Madoff kept several sets of books and false documents, and provided false information involving his advisory activities to investors and to regulators.

Since Commissioners were first informed of the Madoff investigation last week, the Commission has met multiple times on an emergency basis to seek answers to the question of how Mr. Madoff's vast scheme remained undetected by regulators and law enforcement for so long. Our initial findings have been deeply troubling. The Commission has learned that credible and specific allegations regarding Mr. Madoff's financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action. I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them. Moreover, a consequence of the failure to seek a formal order of investigation from the Commission is that subpoena power was not used to obtain information, but rather the staff relied upon information voluntarily produced by Mr. Madoff and his firm.

In response, after consultation with the Commission, I have directed a full and immediate review of the past allegations regarding Mr. Madoff and his firm and the reasons they were not found credible, to be led by the SEC's Inspector General. The review will also cover the internal policies at the SEC governing when allegations such as those in this case should be raised to the Commission level, whether those policies were followed, and whether improvements to those policies are necessary. The investigation should also include all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm.

The Commission believes strongly that it is vital that SEC investigators, examiners, and enforcement staff be above reproach while conducting their duties, in order to ensure the integrity and effectiveness of the SEC. In addition to the foregoing investigation, I have therefore directed the mandatory recusal from the ongoing investigation of matters related to SEC v. Madoff of any SEC staff who have had more than insubstantial personal contacts with Mr. Madoff or his family, under guidance to be issued by the Office of the Ethics Counsel. These recusals will be in addition to those currently required by SEC rules and federal law.

Bernard Madoff, one of Wall Street's best-known brokers and money managers, arrested last week after allegedly confessing to his sons that he had stolen millions, perhaps billions, of their clients' money. The whole thing was—as the criminal complaint quotes Madoff saying—"basically, a giant Ponzi scheme" in which investors who wanted their money back got paid with earlier investors' money. It is fitting that Madoff bilked investors in Boston, New York City and Palm Beach, Florida. Charles Ponzi-who didn't originate but certainly perfected the bilking techniques used by Madoff, was based in Boston, ripped off investers there and in Florida--and the federal government couldn't figure out what he was doing. This is from Ponzi's Wikipedia entry:

On November 1, 1920, Ponzi pleaded guilty to mail fraud, this was pre-federal securities law violations, and was sentenced to five years in federal prison. He was released after three and a half years to face state charges. He was again found guilty and sentenced to nine years. Before entering state prison, Ponzi jumped bail and fled to Florida, where he set up an investment scam to sell "prime Florida property" to gullible investors. The Florida authorities quickly learned of this scheme so he fled to Texas, where he shaved his head, grew a mustache, and tried to flee the country as a crewman on a merchant ship. However, he was caught and sent back to Massachusetts to serve out his prison term.

In the meantime, government investigators tried to trace Ponzi's convoluted accounts to figure out how much money he had taken and where it had gone. They never managed to untangle it and could conclude only that millions had gone through his hands.

There's no shortage of cases in which shady stock brokers, investment advisers and hedge-fund managers have disappeared with hundreds of millions of dollars, but the size of this investment fraud is well beyond anything in Wall Street memory. The amount of money involved—reported widely at $50 billion --is larger than the losses that took down Bear Stearns, bigger than the $7 billion in hidden losses in Societe Generale's Jerome Kerviel scandal, and these were big banks with thousands of clients. Madoff has harmed scores of individuals--and perhaps most troubling, many charitable institutions.

The question that everybody with big chunks of money parked with exclusive fund managers on Wall Street will be asking today is whether there are other possible Bernard Madoffs out there: high-profile managers who've been lying about their returns for years. The answer to this is going to be "yes," which leads to the second question of, "Is there any way to spot them?" Or, in other words: Is there a way to know whether a money manager's returns are too good to be true?

It's a question everyone wonders about but that few investors, even the big ones, ask directly, because there seems to be no way to answer it except by looking a fund manager in the eye and hoping you trust him. Ordinary intuition tells us that just by looking at a string of numbers in a fund manager's reports, there's no way to know if those numbers might be made out of whole cloth. But in fact, it turns out that there may be a good way to guess—and it could well have helped the investors who'd given their money to Madoff see what was going on earlier.

The key here is not looking just at how well Madoff seemed to perform. It's how consistently he seemed to be doing it. Stories in both the New York Times and the Wall Street Journal both noted the pattern. According to the stories, he seemed to make a return of 10 percent or 11 percent a year, year in and year out. And it wasn't just an annual return kind of thing. Almost every month, the WSJ story says, Madoff made somewhere between 0 percent and 2 percent. Hardly any losses, no really outsize gains. He reportedly said that he could consistently make those gains in an up or a down market through his "black box" method..whtever that means. The fact that some investors received no monthly statements and that others received statements that they couldn't understand should have been red flags--especially when it happened for many many years--but it didn't. Many investors quoted in the press have said that they just looked at the bottom line. Those seemed like reasonable returns and they were happy with them. Coomon sense disappeared. This is striking--many of these investors were once captians of industry--maybe even ruthless. I will bet you that they didn't build, and ultimately sell, their businesses by overlooking details. But when it came time to hand over all that hard earned money to Bernie Madoff--common sense disaapeared. Maybe it was the cult of exclusivity that Madoff created. His was a private club and you needed the proper introductions . This, by the way, was a tenet of Charles Ponzi. To conduct any good investment fraud, in Boston, Florida, or New York, you have to create demand. Tell an investor he can't get in, and he wants it even more. And then you have him. As The Wall Street Journal reported:

Details emerged Friday of how Mr. Madoff ran the alleged scam, fostering a veneer of exclusivity and creating an A-list of investors that became his most powerful marketing tool. From New York and Florida to Minnesota and Texas, the money manager became an insider's choice among well-heeled investors seeking steady returns. By hiring unofficial agents, tapping into elite country clubs and creating "invitation only" policies for investors, he recruited a steady stream of new clients.

During golf-course and cocktail-party banter, Mr. Madoff's name frequently surfaced as a money manager who could consistently deliver high returns. Older, Jewish investors called Mr. Madoff " 'the Jewish bond,' " says Ken Phillips, head of a Boulder, Colorado, investment firm. "It paid 8% to 12%, every year, no matter what."

The Madoff story is a bit of an anomaly in that, if what's in the criminal complaint is even close to accurate, he confessed to what was going on before the government came looking for an indictment. It's early to speculate about what might have motivated him, but it's a fair bet that protecting his sons, who ran the business with him, from prosecution would be high on the list of concerns.You can bet that right now, though, major investors are scrambling to crunch the numbers on other boutique managers. One thing that almost everyone on Wall Street has had drummed into them is that bad news is, in Wall Street lingo, "highly correlated": It tends to come in clusters and bunches. If one investment manager's holdings can go from $50 billion to zero overnight, it's likely there are several more multibillion-dollar blowups just waiting to rear their heads. Indeed, just a few days before the Madoff news hit, well-known New York City attorney Marc S. Dreier was accused of running a $300 million investment scam. Little has been heard of that case since Madoff was arrested. I know they say bad luck comes in threes--what about massive investment fraud? This should keep securities fraud attorneys busy for a very long time.

This information is brought to you by the Securities Attorneys at Michaels, Ward & Rabinovitz, LLP.