L.A. investment adviser Stanley Chais oversaw three funds that invested with Bernie Madoff. When the Ponzi scheme collapsed, the Chais investors' accounts were valued at nearly $1 billion. Between 1995 and 2008, the SEC alleges, Chais, his family and related entities withdrew more than $500 million more than they actually invested with Madoff. In addition, the SEC complaint says Chais lied to clients by not disclosing that Madoff was the one actually investing their money. Madoff-related fraud charges were also filed against Cohmad Securities, its co-founder and three others. From the SEC press release:
Chais made a number of misrepresentations over the years to the Funds' investors indicating that he formulated and executed the Funds' trading strategy. In reality, Chais was an unsophisticated investor who did nothing more than turn all of the Funds' assets over to Madoff, while charging the Funds well over $250 million in fees for his purported "services." Despite the fact that Chais turned all of the Funds' assets over to Madoff, many of the Funds' investors had never heard of Madoff before the collapse of his Ponzi scheme, and had not known that Chais invested with Madoff until Chais informed them after Madoff's arrest.The SEC also alleges that Chais ignored red flags indicating that Madoff's reported returns were false. For example, Chais told Madoff that Chais did not want there to be any losses on any of the Funds' trades. Madoff complied with Chais's request, and from 1999 to 2008, despite reportedly executing thousands of trades on behalf of the Funds, Madoff did not report a loss on a single equities trade. Chais however, with the assistance of his accountant, prepared account statements for the Funds' investors based upon the Madoff statements, and continued to distribute them to the Funds' investors even though he should have known they were false.
Here's the complaint and here's an early story from the NYT.