How he did it - allegedly | Biggest fraud in history? | Who is exposed? | SEC complaint against Madoff | What is a Ponzi scheme? | The rise and fall of Charles Ponzi | The 10 biggest swindles - ever

The list of institutions and individuals set to lose billions of pounds after investing in a fund run by Bernard Madoff, the Wall Street broker and former Nasdaq chairman, is growing by the hour.

Royal Bank of Scotland (RBS), the bank majority-owned by the Government, today admitted that it had an exposure of £400 million to the $50 billion alleged fraud.

It joins Man Group, the world's largest listed hedge fund manager, HSBC and Santander, the Spanish group that owns Britain's Abbey, Alliance & Leicester and Bradford & Bingley, which are exposed to Mr Madoff's business.

So far, Santander has emerged as one of the hardest hit after admitting it is sitting on an exposure worth more than €2.33 billion (£2.08 billion) through Optimal, one of its funds.

EIM, the hedge fund group which is run by Arpad Busson, the multimillionaire who is engaged to Uma Thurman, the actress, said that it is exposed to products sold by Mr Madoff for about $220 million.

Bill Glass, partner and head of business development at EIM, founded in 1992 by Mr Busson, confirmed the exposure to Mr Madoff's funds. EIM sells funds of hedge funds and manages around $11 billion.

Mr Busson set up Absolute Return for Kids, a charitable foundation for underprivileged children, which last year raised £27 million, mainly from the hedge fund industry.

RBS’s potential £400 million loss is a new blow to the beleaguered bank, which is 58 per cent owned by the Government after it accepted £20 billion from the taxpayer as part of the recent £37 billion bailout of British banks.

Mr Madoff was arrested last week after apparently admitting to setting up a $50 billion "Ponzi" scheme to defraud investors.

Mr Madoff is believed to have told employees that he was “finished”, that he had “absolutely nothing”, and that “it’s all just one big lie”. There is a 24-hour guard outside Mr Madoff's office in midtown Manhattan.

A Ponzi scheme, otherwise known as a pyramid structure, is where older-established investors are given an abnormally high return using money paid in by new clients instead of using net revenues for payments.

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