There's a lot more to the Madoff story.
Every single investor in Madoff's fund was what's considered an "accredited investor." That means they're "big boys" - they're supposed to do their own due diligence, and aren't afforded the same protections as small-time individual investors saving up for their retirement.
The vast majority of those investors knew that the size, stability, and longevity of the returns he was generating were literally impossible.
Their bet was that Madoff was utilizing insider information - connections with desk traders at banks, large mutual funds, etc. to generate his profits through having prior knowledge of the trades that would be made on behalf of small-time investors.
All the way back in 1999, a forensic accountant named Harry Markopolos alerted the SEC that Madoff Securities was a straight up fraud:
https://www.sec.gov/news/studies/2009/oig-509/exhibit-0293.pdf
Barron's even ran an article in 2001 with quotes from several major hedge fund managers saying that Madoff's purported strategy was impossible for them to replicate - that by doing what he said he did, and backtesting it against known market movements, the profits his fund was "generating" couldn't possibly be real
Don't Ask, Don't Tell: Bernie Madoff Attracts Skeptics in 2001
The reality is that most of Madoff's investors assumed he was doing something illegal to generate such consistently high returns (with such low fees compared to his competitors). What they
didn't assume was that he was just running a standard Ponzi scheme - paying old investors with new investors' money.
The Ponzi he was running remained so successful for so long because there weren't ever many redemptions from his fund - it was tough to get "in" to Madoff's fund, and once you had your money there, there wasn't any other money manager around capable of generating such consistent "returns."
It got so ridiculous that people would invest their money with Madoff, then turn around and borrow against that money and the aggregated returns from a commercial bank - then take that borrowed money and go out and speculate on real estate, other equities, etc. After all, when you've got an asset (investment in Madoff's fund) that's generating such stable returns, why not leverage it into other speculative activity? Some of these people would actually borrow against Madoff investments, turn around, and invest that
borrowed money right back into Madoff's fund - paying the interest on their loan with Madoff's "returns" and pocketing the spread.
But when 2009 hit, and all of Madoff's investors saw their levered assets take huge hits, they had to break open their "piggy bank." That was their investment in Madoff's fund. All of a sudden, all at once, everybody wanted their money back. That exposed the Ponzi scheme - and the rest is is history.
Nobody who invested with that guy deserves an ounce of sympathy. They knew he was a crook, they knew exactly what they were doing - they just thought he was
their crook.
Don't let the nice elderly couple they featured on 60 minutes or whatever fool you.