From Florida golf clubs through Long Island's playground of the rich and famous, all the way to the City of London's boardrooms, investors large and small are reaching to check their wallets, scared they may have become victims of Wall Street's biggest fraud.
Many wealthy clients face financial ruin following the arrest of 70-year-old Bernard Madoff, a Wall Street grandee and one of its most respected and well-connected money managers, on charges of operating a $50bn (£33.5bn) investment scam. Many more expect to emerge with substantial losses and beetroot faces.
In London, the most startling confession came from Nicola Horlick, probably the most famous British fund manager, known as Superwoman for balancing her high-flying finance career with bringing up five children. Her fund, Bramdean Alternatives, had almost 10 per cent of its assets – about £10m – invested with Mr Madoff, money Ms Horlick admitted yesterday she was "uncertain" she would ever see again. Bramdean shares lost a third of their value.
In an interview just a few months ago with the Financial Times, Ms Horlick had praised Mr Madoff. "He is someone who is very, very good at calling the US equity market," she said. "This guy has managed to return 1 to 1.2 per cent per month, year after year after year."
If that sounded too good to be true – well, of course it was.
On Wall Street yesterday, veteran players were still catching their breath, as details emerged about the scam. Madoff Investment Securities in New York claimed to manage $17bn directly on behalf of clients, and through derivatives an estimated $50bn was banking on Mr Madoff's performance. But the complex trading he claimed to be carrying out was a sham, the returns he claimed to be making were fake, and the money he was paying out to clients was funded only by getting more cash in the other door from new victims.
The money-management business was "all just one big lie" and "basically, a giant Ponzi scheme" he told his two sons, Andrew and Mark, when they confronted him on Wednesday night. They turned him in, and the FBI came to arrest him at his Manhattan home on Thursday morning. He had "no innocent explanation" for his behaviour, he told an FBI officer.
If Mr Madoff's estimate of $50bn in losses turns out to be correct, the scam will dwarf anything carried out by the eponymous Charles Ponzi in the 1920s. It would be more than four times larger than the fraud which brought down WorldCom, the telecoms giant, in 2002, the biggest bankruptcy in US history. It is not known yet just how many years the trader may have been cooking his books, but it might also end up as one of the longest to have gone undetected.
Mr Madoff founded his trading firm in 1960 with $5,000 he made from working as a lifeguard on Long Island. By the Seventies, he was one of the industry's best-loved and most respected characters, rising to be a founder of the Nasdaq stock market, which he used to chair. He split his time between Manhattan and Long Island and Palm Beach in Florida, where fellow country club members would see it as a badge of status to have money invested with him. He was a popular choice for the East Coast rich, for charitable foundations, and for professional investors alike. In the centre of the hedge fund world, in Greenwich, Connecticut, many "fund of funds" funnelled money to Madoff investment vehicles. As the scurrilous New York Post put it yesterday, "Suicide hotline in Greenwich could be lit up."
Andrew and Mark Madoff had long worked in the share-trading part of their father's business, but he kept his asset-management activities separate and secret, with books kept under lock and key, and investment returns audited by a backwoods firm rather than one of the major accounting names.
With the credit crisis forcing wealthy investors to cash in their holdings, Mr Madoff appeared under increasing stress in recent weeks. Sitting in his Manhattan study on Tuesday night, he told his sons that clients with $7bn wanted their money back – but that there was no money. I'm "finished", he told them. I have "absolutely nothing".