For Madoff Investors, Big Returns Trumped Concerns

They had known him for years as a golf partner, a family friend. Some were neighbors or fellow members of country clubs on Long Island and in Florida.

Investors inquiring about their money, and others, gather in the lobby of where Bernard L. Madoff...

Investors inquiring about their money, and others, gather in the lobby of where Bernard L. Madoff Investment Securities LLC, have their offices Friday, Dec. 12, 2008, in New York. Bernard L. Madoff, the founder of Madoff Securities, was arrested on a securities fraud charge Thursday, accused of running a phony investment business that amounted to nothing more than a "giant Ponzi scheme." Federal prosecutors said he told employees Wednesday that it had been insolvent for years, losing at least $50 billion. (AP Photo/Diane Bondareff)

(AP)

Many had begun investing with 70-year-old Bernard L. Madoff decades ago, often after being referred by a friend or relative who had known the Wall Street veteran even longer.

There had been some warnings: Financial consultants had been suspicious for years about his astounding run of success.

They couldn't figure out how he managed to produce steady returns, month after month, even when everyone else was losing money — and leave almost no footprint while moving billions of dollars in and out of the markets.

"People would come to me with their statements and I couldn't make heads or tails of them," said Charles Gradante, co-founder of the Hennessee Group and advisor to hedge fund investors.

"He only had five down months since 1996," Gradante said. "There's no strategy in the world that can generate that kind of performance. But when people would come to him and say, 'How did I make money this month?' he didn't like it. He would get upset with people who probed too much."

Those investors were scrambling Friday to learn whether they had been wiped out by what prosecutors described as a multibillion-dollar Ponzi scheme. The assets of Madoff's investment company were frozen Friday in a deal with federal regulators and a receiver was appointed to manage the firm's financial affairs.

According to the criminal complaint, Madoff estimates he lost as much as $50 billion over many years. If true, it could be one of the largest fraud schemes in Wall Street history.

The roster of alleged victims included Sterling Equities, co-founded by New York Mets owner Fred Wilpon, as well as a long list of Madoff's friends, neighbors and country club associates.

Joyce Greenberg, a philanthropist and retired financial adviser in Texas, said her family began investing money with Madoff in the 1970s after being introduced by a stepbrother who knew him from college.