America’s securities regulator charged Stanley Chais, an investment manager to the stars of Hollywood, Palm Beach socialite Robert Jaffe and two brokers with participating in Bernard Madoff’s $65 billion Ponzi scheme.

According to civil charges filed by the Securities and Exchange Commission (SEC), Mr Chais, Mr Jaffe, Maurice Cohen, the chairman of Cohmad Securities Corporation, and his daughter Marcia, Cohmad’s chief operating officer, funnelled billions of dollars to Madoff while "knowingly or recklessly disregarding facts indicating that Madoff was operating a fraud".

The four took hundreds of millions of dollars in fees from investors in return for placing their money with the phony fund manager, the SEC said.

Madoff, who confessed last December that his Manhattan investment firm was a 20-year scam in which he used new customers’ money to pay returns to existing investors, owned 20 per cent of Cohmad. The 71-year-old was convicted on criminal fraud charges in March and is due to be sentenced on June 29.

Robert Khuzami, director of the SEC’s enforcement division, said: "Madoff cultivated an air of exclusivity by pretending that he was too successful to trouble himself with marketing to new investors. In fact he needed a constant in-flow of funds to sustain his fraud and used his secret control of Cohmad to obtain them."

James Clarkson, acting director of the SEC’s New York regional office, added: "These Madoff solicitors collectively received several hundred million dollars in fees over the past few decades while Madoff ruined the finances of countless investors."

These are the SEC’s third set of civil charges related to the $65 billion fraud. The regulator previously charged Madoff and his auditor David Friehling over the scam.

The SEC said that Mr and Ms Cohen and Mr Jaffe, a vice-president of Cohmad, ignored and even participated in many of the fund manager’s suspicious activities.

Mr Jaffe helped Madoff sucker victims in the wealthy enclave of Palm Beach, Florida, out of more than $1 billion in return, the regulator alleged.

Mr Chais, who advised Hollywood figures including Eric Roth, the screenwriter, and Michael Chaleff, an entertainer and magician, told clients that he was a skilled fund manager.

Instead, he handed customers’ money to Madoff in return for fees of $250 million, the SEC said, while ignoring red flags that indicated the fund manager’s returns were false.

Cohmad, Mr Chais and Mr Jaffe already face civil claims from investors ripped off by Madoff and by the Massachusetts’s attorney general.

An attorney for Mr Chais said that the investment adviser was "solely a victim and has faith that the judicial system will allow him to fight these reckless charges". Mr Jaffe's attorneys said that the SEC's charges were "unfair, baseless in the law and ... inaccurate in its understanding of the facts".

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