Financial giants revealed potential losses of almost £4 billion today as they joined a queue of investors caught up in an alleged fraud by investment manager Bernard Madoff.
The Royal Bank of Scotland, HSBC and Abbey owner Santander as well as France's BNP Paribas and Japan's Nomura Holdings all reported they had fallen victim to Madoff's alleged 50-billion US dollar (£33 billion) pyramid scheme.
The Wunderkinder charity connected to film director Steven Spielberg and the foundation of Nobel laureate Elie Wiesel were also reportedly among the investors.
Madoff, 70, a well respected investment manager and former chairman of New York's Nasdaq stock exchange, was arrested last week after apparently telling his employees his operations were "all just one big lie" and "basically, a giant Ponzi scheme".
A Ponzi scheme is a fraudulent investment vehicle which pays very high returns to existing investors paid for by money put into the fund by newcomers.
The arrest has raised questions about the competence of financial regulators.
Hedge fund giant Man Group said: "Based on information available to date, it appears that a systematic and comprehensive fraud may have been committed, evading a range of structural controls."
The company, which said it had approximately 360 million US dollars (£239 million) of exposure, said Madoff Securities was registered with the Securities and Exchange Commission (SEC), which monitors investment funds.
Madoff Securities was also a member of five self-regulatory organisations, including US independent securities regulator Finra and the Nasdaq.
Nicola Horlick, who manages Bramdean Alternatives, which had 9% of its funds invested with Madoff's scheme, said the SEC had given it a "clean bill of health".
"I think now it is very difficult for people to invest in things that are meant to be regulated in America because they have fallen down on the job," she told the BBC Radio 4 Today programme.
"All through the credit crunch this has been apparent. This is the biggest financial scandal, probably, in the history of the markets."
She added that even if Bramdean Alternatives was forced to write off its entire investment in Madoff's scheme it would still only be down 4% on the year while the stock market had fallen 35%.
The Royal Bank of Scotland - 58% owned by the taxpayer - said £400 million was at risk while Spanish bank Santander, which owns Abbey and the savings business of Bradford & Bingley, said its potential exposure was around £2.1 billion.
HSBC said it believed it had a potential exposure of around 1 billion US dollars (£668 million) from providing finance to "a small number" of clients who then invested with Madoff.
Nomura, Japan's largest securities company, had £204 million invested with Madoff, while Switzerland's Reichmuth & Co said the private bank had £218 million of exposure. BNP Paribas estimated its exposure to Madoff's fund could lead to £311 million in losses.
The FBI said members of Madoff's own family turned him in after he confessed.
According to court documents released by the SEC, Madoff told two senior staff members that he was "finished" and he had "absolutely nothing". He said he planned to hand himself in, but would first use his remaining 200 to 300 million US dollars (£130 to 196 million) to pay certain employees, family and friends.
The documents said Madoff told the pair his business was insolvent and had been for years, they also said he estimated the losses from his scheme were £33 billion.
Many of the victims of the alleged fraud were connected to Madoff's reputation as a philanthropist.
New Jersey Senator Frank Lautenberg - one of the wealthiest members of the US Senate - entrusted his family's charitable foundation to Madoff and the Wall Street Journal reported Steven Spielberg's fund, alongside the Elie Wiesel foundation and money from property magnate Mortimer Zuckerman were also affected.
Reports from Florida to Minnesota in the US included ordinary investors who gave Madoff their money. Some had been friends with him for decades, others were able to invest because they were a friend of a friend.
They told stories of losing everything from £26,000 to an entire nest egg worth almost £1 million.
Harvey Pitt, a former chairman of the SEC, said the fact that foundations and charities could lose out is the "real tragedy".
The assets of Bernard L Madoff Investment Securities were frozen last Friday in a deal with US government regulators and a receiver was appointed to manage the firm's financial affairs. Madoff is on £6.6 million bail.