In what could be the largest case of fraud in Wall Street history, Bernard Madoff allegedly conned $50-billion out of investors. Not small-time, unsophisticated, gullible people either. The list of investors is staggering, stretches across the world, and includes banks, corporations, charities and celebrities. How could he pull that off? Didn't these people have a clue what he was up to?

To be truthful, Madoff's scheme is nothing new, it's the scope of it that's incredible. As a former head of NASDAQ and a well known, New York investment advisor, Madoff was a respected entity on Wall Street. His investment firm had been in business for more than 40-years and he wined and dined with the crème de la crème in New York and played golf with celebrities in Palm Springs. He found his victims in synagogues, social arenas and boardrooms. His scam was run like an exclusive social club. His prey felt privileged to be included and didn't dare ask too many questions and risk being kicked out.

Prosecutors contend the fund operated as a Ponzi scheme, a pyramid-style fraud that promises high rates of return but actually pays early investors with the money raised from later investors. Most of these type scams collapse within a few months or years, but Madoff had been in business since 1960 – a factor that helped reassure many investors. He was also a lauded philanthropist. Someone who's so generous with their money wouldn't steal, would they?

This type of affinity scam has been around forever and anyone can fall prey. It involves someone you know, maybe a trusted friend or relative. They may or may not know they're being scammed themselves. This person offers you a “new”, “exclusive” opportunity and a rare chance to get in on the action. Madoff didn't have to look far to find his victims. They practically lined up at his door – after all, he was an investment guru -- and his list of satisfied clients ranged far and wide.

Madoffs victims weren't dumb, in fact, most were successful business people, but they just didn't do their homework and didn't follow the basic rules of smart investing. The very first thing a savvy investor does before giving anyone money, is research. There were red flags that should have risen had any of Madoff's duped investors asked enough questions or dug a little deeper into his investment proposals.

Some unfortunate folks lost their entire portfolios or nearly all their retirement savings in the scam. This brings up a key point that enthusiastic investors often forget – never invest more than 10-percent of your money in one area no matter how big the potential payoff. Had any of Madoff's clients followed this tenet, they wouldn't be feeling nearly as much pain as they are today.

And it bears mentioning that some investors lost money they didn't even have. They borrowed money to invest because the opportunity seemed too good to pass up, and they didn't want to miss out on it. Today, and for the foreseeable future, they'll be paying back those loans with nothing to show but a red face and a hard-earned lesson. Never borrow funds to invest in a high-yield investment program. There is no opportunity that's too good to pass on, especially if you don't have the money.

As the fate of Madoff plays out and more details surface on the size and scope of his scam, there are some investment lessons that can be learned. Clearly, there were clues that savvy, careful investors could have seen. When investing in high-yield investment programs, stick to sound, standard rules and don't rely on personal connections or hunches. Unfortunately, as so many Madoff investors are learning, it's much more than your money- it's your life!