According to a document filed at the U.S. District Court in Manhattan, US Prosecutors are seeking the forfeiture of Madoff’s homes, cars, boats, securities, silverware and a piano that were believed to be paid for with gains from his illegal business activities.

Bernard Madoff is accused of swindling as much as $65 billion dollars from numerous investors. His scheme didn’t discriminate – he took from actors, charitable organizations and Holocaust survivors.

Madoff took new investment dollars to pay off earlier investors. When the credit market imploded and Madoff couldn’t tap into new money to cover the withdrawal requests of his clients, his fraudulent investment company came undone.

Madoff was denied bail and is currently in jail awaiting sentencing, scheduled to take place on June 16, 2009.

Madoff, the former Chairman of NASDAQ, has been under house arrest since December 2008.

On Friday US District Judge Denny Chin invited victims to attend court this Thursday, when Madoff is expected to enter his “Guilty” plea.

It’s widely being speculated that Madoff is likely to enter into a “plea agreement” in order to minimize his legal damages. After his guilty plea, it’s expected that the District Attorney will hit the disgraced financier with even more charges.

“Madoff is about to enter his guilty plea,” SEC attorney Jacob Frenken said. “A criminal information is a consented-to criminal charge used to enter a guilty plea.”

“You are both a captive regulator and a failed regulator,” said Markopolos in his testimony to a U.S. House subcommittee.

Markopolos said he spent nine years trying to get the SEC interested in Madoff’s doings. He also stated they couldn’t understand the scheme because of the complex financial instruments involved.

“The SEC was never capable of catching Mr. Madoff,” Markopolos said.

Markopolos also said more “feeder funds” are out there, but haven’t come out of the woodwork just yet.

“My team was out there in the field talking to the Madoff feeder funds and identifying who they were,” he said. “There are 12 more out there lying low in the weeds in Europe that you have not heard of yet.”

According to Rene-Thierry Magon de la Villehuchet’s brother, Bertrand, Rene-Thierry Magon de la Villehuchet lost “several tens of millions” of his own personal wealth by vesting with Bernard Madoff.

Bertrand told the AP, “He trusted Madoff completely.”

Rene-Thierry Magon de la Villehuchet was found dead in his Access International Advisors New York office with both of his wrists slit and a bottle of sleeping pills near his body last Tuesday.

According to Access International Advisor’s website, the company specialized in “managing hedged and structured investment portfolios.”

Rene-Thierry Magon de la Villehuchet’s investment clients included friends and family and his company was one of the largest investors in Madoff’s “fund.”

He and his company lost over a billion dollars of holdings when Bernard Madoff finally came clean about his illegal (and immoral) activities.

Bertrand said, “At first he thought he’d be able to get the money back. He was very determined. Gradually he realized he wouldn’t be able to.”

Other victims of Bernard Madoff’s investment fraud include the Elie Wiesel Foundation for Humanity, Lilliane Bettencourt of L’Oreal fame, the Robert I. Lappin Charitable Foundation, the Picower Foundation and several other charitable foundations and individual investors.

The total scope of Madoff’s losses remains unknown.

It’s estimated that Bernard Madoff lost $50 billion dollars using an uncomplicated scheme that promises high returns on investment (ROI) to new investors. The “new” cash is then used to pay earlier investors, but the scheme failed after new investors dried up and global credit markets failed to provide more cash for leverage.

Madoff was arrested on December 11, 2008. The day before his arrest he confessed to his senior executives that the management and advisory segment of the business was “basically, a giant Ponzi scheme.”

The suit claims that Merkin and his hedge fund, Ariel Fund Ltd. and its’ management group Gabriel Capital Corporation, failed on their responsibility of cash management by turning the money over to Madoff for investment. The Ariel Fund Ltd has already announced plans to liquidate their holdings in light of the recent scandal. The suit also mentions Fortis, who partnered with Merkin in the creation of Ariel Fund Ltd. All told, NYU had invested a staggering $94 million into the fund.

As the losses come in from the Madoff scam, the elite of New York City Jewish philanthropy are among the victims, as well as helping to perpetrate the fraud. Merkin is the grandson of Hermann Merkin who was known as a titan of Jewish philanthropy. He donated gave millions to help build Yeshiva University, and the Fifth Avenue Synagogue.

Human loss mounts in Madoff Ponzi Scheme

The human expense of the Madoff scheme is mounting. Charitable foundations and lives have been destroyed. Merkin clearly used his influential position and the capital of Yeshiva University to invest $1.8 billion into Bernard Madoff’s firm.

That was little consolation, however, to Yeshiva University, said to have lost $110 million of its endowment; or to Congregation Kehilath Jeshurun, the Ramaz School of Manhattan and SAR Academy in Riverdale, said to have lost substantial sums; or to several family foundations belonging to Merkin’s fellow trustees at Yeshiva University, including Robert M. Beren and Ludwig Bravmann.

Another Ascot casualty was a charitable trust founded by real-estate magnate Mortimer Zuckerman, the chairman of real-estate firm Boston Properties and owner of the New York Daily News and U.S. News & World Report. That lost $30 million.

NYU said Merkin blindly turned the money over to Madoff.

“Without making disclosures in the quarterly reports to investors, and in the face of an extraordinary number of ‘red flags,’ Merkin, for years, simply turned over a substantial portion of Ariel’s funds to Madoff,” said NYU in their complaint.

Merkin has so far denied wrongdoing, laying the blame squarely on Madoff.

“Mr. Merkin remains committed to obtaining for shareholders the best results possible in the wake of the terrible fraud committed by Bernard Madoff,” Andrew Levander, attorney for J. Ezra Merkin said.

Madoff has caused huge damage to the work of Jewish philanthropic organizations

It’s safe to say the the amount of damage to Jewish philanthropic organizations is significant.

The Elie Wiesel Foundation for Humanity has lost virtually all of their funds as a result of investing with Madoff.

The Elie Wiesel Foundation for Humanity said Wednesday it invested $15.2 million or “substantially all” of its assets with Bernard Madoff, adding the name of the Nobel Prize winner to the confirmed list of those caught up in what Mr. Madoff described as a $50 billion Ponzi scheme.

“We are deeply saddened and distressed that we, along with many others, have been the victims of what may be one of the largest investment frauds in history,” the foundation said in a statement posted on its Web site.

The foundation was started by Holocaust survivor and Nobel Prize Winner Elie Wiesel and his wife in 1986. The foundation will not be going out of business. Of course a man like Wiesel who won a Nobel prized for detailing “his own personal experience of total humiliation and of the utter contempt for humanity shown in Hitler’s death camps” can survive a financial crisis like this. Other charitable foundations have not been so lucky, already wrapping up their operations upon learning of their lost endowments.

Bernard Madoff is unique among scammers due to the size of his Ponzi scheme, and the fact he was willing to stick it to anyone, even fellow Jewish people, no matter how close of a friend they considered him to be.

A Ponzi scheme is named after Boston-area Italian immigrant swindler Charles Ponzi. Ponzi instituted a simple scheme, involving postage stamp speculation.

“Ponzi thought he could take advantage of differences between U.S. and foreign currencies used to buy and sell international mail coupons. Ponzi told investors that he could provide a 40% return in just 90 days compared with 5% for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during one three-hour period—and this was 1921″

Ponzi schemes rely on trust and a constant stream of new investors

The key was that Ponzi paid return to earlier investors with the proceeds of the newest people to the scheme. A Ponzi scheme can only keep functioning if new investors are constantly brought in. The irony of Ponzi’s scheme and the fraud by Bernard Madoff is that much of the marketing is done by “satisfied” clients, who don’t know what’s really going on but are impressed by the massive returns.

Ponzi was eventually brought down because many people felt the returns were too good to be true. Once they realized that there was no “postage stamp arbitrage” occurring, they moved in to arrest him.

Bernard Madoff is the latest scam operator to engage in a pyramid scheme

Bernard Madoff’s Ponzi scheme was more sophisticated. Madoff was receiving billions of dollars that were being solicited by hedge funds, often funds that were run by highly respected individuals. As long as the investors “trusted” the hedge fund advisor and were certain of high returns, they didn’t ask too many questions.

Of course numerous red flags exist for investors who are considering putting money into a Ponzi scheme. The phrase “too good to be true” comes to mind. Even investors who were bilked by Madoff realized that his annuals returns in the 10-11% range seemed a bit pat, especially considering the performance of the market as a whole.

In the U.S., these types of schemes are called “Ponzi schemes” because of the singular success of Charles Ponzi. But in many other parts of the world, they’re referred to merely as “pyramid schemes.” They all end the same way. When the musical chairs stop and the stream of new investors dries up, the company can’t make payments and investors “wise up.”

The single biggest reason pyramid schemes fail is because of their size. At some point, they have trouble attracting new investors. When they can’t find fresh meat, the money dries up and any redemptions from older investors can’t be paid. At that point, things tend to decelerate quickly. In the case of Madoff, his scheme grew so large and went on for so long because had so many accomplices, both witting and unwitting. Hedge funds became very attractive to people in the last few years because of the huge returns they promised.

When people lose all sense of rationality and invest with the idea of “highest return” only, they are making themselves perfect targets for fraudulent operators. A Ponzi scheme can never exist without at least some greed on behalf of the investors and a lot of greed from the operator.

As Bernard Madoff proved, Ponzi schemes can take in victims including some of the wealthiest and most savvy investors around. The only question now, is, will Charles Ponzi fade in the minds of consumers to be replaced by Bernard Madoff, the true and undisputed kind of pyramid schemes?