Full extent of $50bn Wall Street pyramid schemes emerges

The list of investors who say they were duped in one of Wall Street's biggest pyramid schemes is growing, snaring some of the world's biggest banking institutions and hedge funds, the super rich and the famous, pensioners and charities.

The alleged victims who sunk cash into veteran Wall Street money manager Bernard Madoff's investment pool include real estate magnate Mortimer Zuckerman, the foundation of Nobel laureate Elie Wiesel, and a charity of movie director Steven Spielberg, according to the Wall Street Journal.

Among the world's biggest banking institutions, Britain's HSBC Holdings PLC, Royal Bank of Scotland Group PLC and Man Group PLC, Spain's Grupo Santander SA, France's BNP Paribas and Japan's Nomura Holdings all reported they had fallen victim to Madoff's alleged US$50bn (€33bn) Ponzi scheme.

The 70-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested on Thursday in what prosecutors say was a $50bn scheme to defraud investors.

Some investors claim they've been wiped out, while others are still likely to come forward.

"There were a lot of very sophisticated people who were duped, and that happens a great deal when you've had somebody decide to be unscrupulous," said Harvey Pitt, a former chairman of the Securities and Exchange Commission, a regulator in charge of monitoring investment funds like the one Madoff operated.

The extent of the potential damage prompted Britain's Nicola Horlick, nicknamed "Superwoman" while a fund manager at Societe Generale, to lash out at US regulators for failing to detect the fraud earlier.

"I think now it is very difficult for people to invest in things that are meant to be regulated in America, because they have fallen down in the job," Horlick, the manager of Bramdean Alternatives, which has 9% of its funds invested in Madoff's scheme, told the BBC.

"All through the credit crunch this has been apparent," Horlick added. "This is the biggest financial scandal, probably, in the history of the markets."

Among US investors, the Boston-based Robert I. Lappin Charitable Foundation, a charity that financed trips for Jewish youth to Israel, sacked its staff after revealing that the money for its operations was invested with Madoff.

New Jersey Senator Frank Lautenberg, one of the wealthiest members of the Senate, entrusted his family's charitable foundation to Madoff. Lautenberg's attorney, Michael Griffinger, said they weren't yet sure the extent of the foundation's losses, but that the bulk of its investments had been handled by Madoff.

Reports from Florida to Minnesota included profiles of ordinary investors who gave Madoff their money. Some had been friends with him for decades, others were able to invest because they were a friend of a friend. They told stories of losing everything from US$40,000 (€29,455) to an entire nest egg worth almost US$1.5m (€1.1m).

They join a list of more powerful investors that have come forward, all worried about the extent of their losses. The roster of names include former Philadelphia Eagles owner Norman Braman, New York Mets baseball team owner Fred Wilpon and J Ezra Merkin, the chairman of GMAC Financial Services, among others.

Among those overseas confirming exposure today, Banco Santander, the largest bank in the euro zone by market capitalisation, said its clients have €2.33bn at risk with Madoff, mostly through a fund called Optimal Strategic US Equity.

HSBC, Britain's largest bank, said a "small number" of its institutional clients had exposure totalling some £660m (€738.6m) in Madoff funds.

It added that it has custody clients who have invested with Madoff, but it did not believe those "custodial arrangements should be a source of exposure to the group".

On Friday, representatives from major US banks - Bank of America, Citigroup, PNC Financial Services Group and Merrill Lynch - declined to comment on if they had exposure to Madoff's company. Both BlackRock and Goldman Sachs Group said they had nothing at risk.

Morgan Stanley, Wells Fargo, Comerica and US Bancorp did not immediately return calls seeking comment.