Director Steven Spielberg is only one of many prominent investors who were allegedly swindled by one of Wall Street's biggest money managers, Bernard Madoff.
Publishing and real estate magnate Mort Zuckerman, former New Jersey Sen. Frank Lautenberg and Fred Wilpon, the owner of the New York Mets baseball franchise, are also among those who were reportedly burned in what prosecutors call a massive Ponzi scheme that was revealed after the collapse of Bernard Madoff Investment Securities, according to The Wall Street Journal. Losses from the alleged fraud could reach $50 billion.
Spielberg's charity, the Wunderkinder Foundation, invested nearly 70 percent of its money with Madoff, said The Wall Street Journal. Other charitable organizations that invested with Madoff may have to shut their doors.
And average investors like Arnold and Joan Sinkin said they were stunned when they learned "in one telephone call" that their retirement fund had vanished.
The Sinkins had saved close to $1 million during Arnold Sinkin's 54-year career as a carpet salesman, and all their money was managed by Madoff.
"This is what they refer to as the golden years, where you retire, you try to enjoy life. And then you get wiped out in 48 hours," Sinkin, 76, said.
The Sinkins said they have no choice but to sell their dream home. "Everything we planned for our whole lives is gone. We just don't know where to turn. Who's gonna help us?" asked Sinkin.
How Did It Happen?
The Sinkins and other investors wonder how Madoff was able to get away with the fraud for so long, and industry experts ask whether the Securities and Exchange Commission was asleep at the wheel.
Securities executive Harry Markopolos raised an alarm in 1999 when he warned the SEC it should investigate Madoff because he thought it was impossible for the kind of profit Madoff was making to have been gained legally.
Financial industry experts said that one bad trade could have set the entire scheme into motion. When that may have happened, however, is unclear.
"Most of these Ponzi schemes, so-called Ponzi schemes, start out with an honest investment firm and honest intentions, and for whatever reason, a trade gone bad, you start to rob from Peter to pay Paul until Peter's no longer available and it starts to feed on itself. That's what essentially is the speculation of what happened. The timing of when that actually kicked into gear, we don't know yet," Liz Ann Sonders, chief investment strategist at Charles Schwab, said.
Madoff Attracted Big Name Investors
With an extraordinary track record and a charismatic personality, Madoff easily attracted big investors.
"As a broker dealer, Bernie Madoff is a tremendously warm, nice, caring, thoughtful, attractive person, and I think that seduced many people," said Jim Vos, the CEO of Aksia, an independent hedge fund research and advisory firm.
Madoff's firm was the subject of two investigations by the Securities and Exchange Commission in 2005 and 2007. The first investigation found him to be in violation of trading rules, but the case was later dropped.
"I have to imagine there is a level of incompetence, sadly, at the SEC on this," Andrew Ross Sorkin, the chief mergers and acquisitions reporter for The New York Times said. "I think maybe this was a trade that's gone bad or something else. But to think this took place this long and the regulators missing it every time? That's an even sadder story."
SEC officials stress that it was Madoff's separate and secretive investment-adviser business that was used to perpetrate the alleged scheme, and that examinations of the securities operations wouldn't necessarily have detected irregularities. The hedge fund business didn't register with the SEC until September 2006.
Investor Warren Buffett has said, "Only when the tide goes out that you learn who has been swimming naked."
Mellody Hobson, "Good Morning America's" financial contributor and president of Arial Capital Management, said more problems within the industry may come to light.
"What worries me is that in this kind of environment, where there have been significant losses in the market is that people start to stretch," she said. "They get more aggressive because they're desperate to dig out of the holes they are in, and they may do some things that actually make the situation worse."
The Associated Press contributed to this report.