The credit crisis is in danger of making us blasé about enormous sums of money. Even so, the scale of the losses from the apparent fraud carried out by Bernard Madoff is breathtaking.

The US authorities say that he has confessed to losing $50 billion (£33 billion) of investors’ money through a long-running scam, equivalent to more than £100 for every man, woman and child in the US. If true, it would make Mr Madoff the biggest fraudster ever.

The figure was so huge that some observers refused to believe it. Mr Madoff had been traumatised by meltdown in the markets and had lost his marbles, they suggested. Yet institutions including Royal Bank of Scotland and HSBC have already declared that they face losses that now total more than $20 billion.

Mr Madoff has admitted that he had for years been operating “a giant Ponzi scheme”, in which existing investors were paid returns on their money from the funds received from new investors. At the moment, we have only Mr Madoff’s word for the scale of the losses. We have no idea who else was in on the fraud or how much was creamed off and how much was simply lost on bad investments: even these days you have to work pretty hard to lose $50 billion. What we do know is that he conned some of the most sophisticated investors, including Nicola Horlick, chief executive of Bramdean Asset Management and one of the City’s best known personalities, and Arpad Busson, the London-based manager of EIM, a Swiss hedge fund.

In one sense, their gullibility was understandable. Mr Madoff was far from the stereotype of the shadowy, get-rich-quick money manager. He was a highly respected figure on Wall Street who had been around since 1960. His firm ran a successful securities broker and he served as chairman of Nasdaq, the high technology stock market.

This respectability may have lulled investors. Yet there were many warning signals that they appear to have ignored, raising questions about their judgment.

The investor returns that Mr Madoff claimed were so consistent over so many years were suspicious. The operation was audited by a three-person accountancy firm. US regulators investigated Mr Madoff’s firm several times but found nothing of substance. His scheme finally collapsed when investors hit by the credit crisis asked for $7 billion back. There must be a worry that other boom-time frauds will now be exposed by the bust.

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