Participants in the Madoff investment scandal Stanley Chais, a philanthropist who invested heavily with Mr. Madoff, and Carl J. Shapiro, one of the money manager's oldest friends, are among at least eight Madoff investors and associates being scrutinized by the U.S. attorney's office in Manhattan. Prosecutors are continuing to probe Madoff family members and employees. Others include: Frank Avellino, a Florida accountant who ran an investment fund that invested client money; Noel Levine, a real-estate investor who works out of a two-room office on the 17th floor, next door to Madoff's fraudulent investment operation, and Palm Beach investor Robert Jaffe, a son-in-law of Mr. Shapiro who
Ponzi scheme cash flows as investors cannot transfer money. If a few investors do wish to withdraw their money in accordance with the terms allowed, their requests are usually promptly processed, which gives the illusion to all other investors that the fund is solvent and financially sound. Ponzi schemes sometimes begin as legitimate investment vehicles, such as hedge funds that can easily degenerate into a Ponzi-type scheme if they unexpectedly lose money or fail to legitimately earn the returns expected. The operators fabricate false returns or produce fraudulent audit reports instead of admitting their failure to meet expectations, and the operation is