Bloomberg comes down hard on Madoff’s so-called feeder funds, which it correctly labels “enablers” in its headline.

If the 70-year-old money manager was running a con, then his marketers like Access International, wittingly or not, were part of the scam.

The purported mission of such feeder funds was to vet hedge funds for wealthy clients. Instead, the line between victim and perpetrator was blurred. Middlemen like Littaye funneled billions of dollars to Madoff, even, in some cases, when they suspected he was engaged in questionable trading practices. In return, they reaped hundreds of millions of dollars in client fees.

Bloomberg quotes a Swiss banker saying Madoff’s touts knew his returns were too good to be true, but thought he was doing that by “front-running” share purchases, using the trading side of his company to make money off inside information on clients’ trades that were big enough to move the market. That’s way illegal, of course.

This banker straight-up admits to Bloomberg that he thought Madoff was front-running. And others have, too:

Other money managers made similar winks and nods about Madoff’s advantage, according to people who were pitched the funds. One Swiss bank, Geneva-based Union Bancaire Privee, which had $700 million invested with Madoff, told clients in a Dec. 17, 2008, letter that “in essence, the perceived edge was Madoff’s ability to gather and process market-order-flow information to time the implementation of the split-strike option strategy.”

This is an amazing number:

The most important middlemen were the feeder funds that enabled Madoff to evolve from a retail asset manager running money for individual clients to a wholesaler managing large pools of capital. At the end, seven of Madoff’s top feeders had a combined $25 billion in assets with him, led by Fairfield Greenwich Group’s $7.5 billion.

And Robert Shiller is interesting on the social psychology of the Ponzi scheme:

It’s the same mind-set that’s behind economic bubbles, which are “naturally occurring Ponzi schemes,” says Robert Shiller, a professor of economics at Yale University and author of Irrational Exuberance (Princeton University Press, 2000). Successive waves of investors generate gains for the last wave until the bubble bursts.

“The essence of a Ponzi scheme is a story that justifies these enthusiasms,” Shiller says, whether the phenomenon is Internet stocks or housing prices or Madoff. “The social feedback loop of other people making money causes people to suspend disbelief.”

Bloomberg is very smart to show how the feeder funds’ managers ended up with most of their clients’ money:

The feeder funds became Madoff’s ad hoc sales force. The payoff was the steady flow of fees. Every billion dollars invested in Madoff generated $150 million in paper profits a year for clients, based on a 15 percent return.

If a fund charged its clients 1 percent of the assets under management and 20 percent of the gains, as the largest one did, that translated into $41 million in annual fees.

Assuming Madoff didn’t do any investing on behalf of his clients, as investigators now suspect, the feeder funds were, in effect, being paid out of principal, which would have been depleted after 15 years.

In other words, much of the money invested in Madoff through feeder funds wound up in the pockets of fund managers.

This is a long but worthy effort by Bloomberg.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.