SFO investigates middlemen who fed cash to Madoff

The Serious Fraud Office is examining whether UK banks or financial advisers acted improperly by putting their clients into Bernard Madoff's record-breaking Ponzi scheme.

The Government's fraud-busting division is understood to be a "keen participant" in the investigation into the New York-based investment manager, who is alleged to have defrauded clients of $50bn (£33.5bn) over more than two decades.

The SFO is looking at the intermediaries who introduced any UK investors to Mr Madoff and lent them the funds with which to invest. Its work is at an early stage and is not believed to have uncovered specific allegations of wrongdoing.

On both sides of the Atlantic and around the world, heat is rising on the banks, brokers, hedge funds and personal go-betweens who funnelled investor money to Madoff Investment Securities, which was shut down after Mr Madoff's arrest a little over a week ago.

He allegedly confessed to his two sons that his business was "all just one big lie", and that he had been faking investment returns, paying existing clients with money taken in from new investors – a classic Ponzi scheme.

Furious clients of Mr Madoff, including charities as well as rich individuals, have launched lawsuits against intermediaries, amid accusations that they should have investigated Mr Madoff's methods, particularly in light of rumours about his trustworthiness.

The Securities and Exchange Commission, Wall Street's regulator, has been examining records Mr Madoff kept under lock and key in his Manhattan headquarters, and now believes his victims number more than 4,000. Authorities have also interviewed employees of Madoff Securities International, an affiliated business in London, which the SEC believes could be important to their investigation.

The London business was majority-owned by Mr Madoff and a spokesman says it managed only his personal money, some £100m. It has shut down its operations and is laying off its 28 staff, including 15 traders, although some are still working with its liquidator, Lee Richards.