WASHINGTON - THE chairman of the US Securities and Exchange Commission said on Tuesday he was 'gravely concerned' by the agency's apparent multiple failures to thoroughly investigate allegations of wrongdoing at broker Bernard Madoff's firm.

Madoff, a former Nasdaq Stock Market chairman, was arrested and charged last week with running a massive Ponzi scheme that may have racked up US$50 billion (S$74.7 billion) in potential losses.

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The longtime Wall Street executive on Tuesday scrambled to find relatives or friends to guarantee his bond and keep him of jail.

The SEC has come under fire for not uncovering the scandal until senior employees of Madoff went to authorities last week.

The investor protection agency has been accused of missing a number of red flags about the way Madoff operated his investment business.

'Our initial findings have been deeply troubling,' SEC Chairman Christopher Cox said in a statement late on Tuesday.

Mr Cox said the SEC has learned that credible and specific allegations regarding Madoff's financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the commission for action.

'I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them,' Mr Cox said.

Mr Cox has asked the agency's internal watchdog to probe the agency's conduct in the Madoff case. Specifically, Mr Cox has asked the inspector general to review past allegations and the reasons they were not found credible. The inspector general probe should also include all staff contact and relationships with the Madoff family and firm, Mr Cox added.

In Massachusetts, where the disgraced investor long cultivated a loyal group of wealthy individuals, the state's chief securities regulator subpoenaed Bernard L. Madoff Investment Securities and Cohmad Securities Corp, a firm that marketed Madoff investment products.

The two firms must hand over the names and addresses of all local residents who let Madoff invest their money by Dec 29.

They must also deliver notes, emails, meeting agendas related to investments made since 2000, Mr William Galvin, the state's Secretary of the Commonwealth, said on Tuesday.

In New York, Madoff, who was arrested last week, has not yet fully met the conditions of his US$10 million bond, according to court papers. He must find three co-signers to guarantee the bond.

If he fail to meet all the conditions, prosecutors could seek to have the 70-year old Madoff jailed, pending trial. A court hearing was set for Wednesday on bail matters after a Tuesday hearing was postponed.

Madoff, a former chairman of the Nasdaq Stock Market, faces up to 20 years in prison and a maximum fine of US$5 million if convicted.

As more banks, hedge funds and wealthy investors around the world realise they fell victim to a man long respected on Wall Street for the steady returns that his funds produced year after year, their outrage has grown.

Law school lawsuit
'The names and sizes of those exposed to Bernard Madoff keep growing and most remarkable of all is the concentration of investments made by funds of hedge funds which promise their clients a diversified portfolio,' said Mr Philippe Bonnefoy, chairman of the asset allocation committee at Cedar Partners, an investment adviser.

A fund of hedge funds is a basket of funds selected by the manager to spread around risk.

New York Law School sued Ascot Partners LP, an investment firm, general partner J. Ezra Merkin and auditor BDO Seidman LLP on Tuesday over investments with Madoff.

Massachusetts Mutual Life Insurance Co acknowledged its exposure to Madoff after a hedge fund unit invested heavily with him. Tremont Holdings Inc's Rye Investment Management unit lost roughly US$3 billion, nearly all of the money the unit managed, people familiar with the matter said.

Madoff is also closely tied to Mr Carl Shapiro, a 95-year-old Boston philanthropist who bestowed much of his fortune to the city's Beth Israel Deaconess Medical Centre and the city's Museum of Fine Arts.

Austria's Bank Medici, a closely held bank serving wealthy clients, also said it was affected by Madoff's scheme, but declined to give a total for its losses.

At the same time, prosecutors and regulators asked people who suspect that they lost money to Madoff to come forward.

The US Attorney's Office in New York, which is prosecuting the Madoff case, set up a website for investors who may have been victimised. It also posted an FBI hotline number, for investors to call.

Sifting through the papers
Investors were requested to gather any documents related to their Madoff investments and to check the website and others set up by the US Securities and Exchange Commission, the trustee of Madoff's brokerage business and the court-appointed receiver in the case.

Lawyers worried that many of the financial statements that Madoff's firm mailed to clients were not accurate, and that it will take months to sift through the papers.

'This is a mess and it will take much longer than normal,' said Mr Douglas Hirsch, a partner at law firm Sadis & Goldberg, describing the work facing the trustee appointed to oversee the liquidation of Madoff's firm.

The Securities Investor Protection Corp, a nonprofit organisation that provides limited insurance on investors' accounts, was named as trustee on Monday.

Madoff, who was well-known on the charity ball circuit and long supported cancer and diabetes research, also gave about US$238,200 to political candidates, parties and committees, mostly Democratic, since 1991, according to the Center for Responsive Politics, which tracks political giving.

US Senator Charles Schumer, a New York Democrat, received US$12,000, while US Representative Edward Markey, a Massachusetts Democrat, received US$10,000 over the years, the Centre found.

The impact of Madoff's alleged fraud may be felt most severely among hedge funds. For example, the Credit Suisse/Tremont Hedge Fund Index fell 4.15 per cent in November, far more than the preliminary 0.7 per cent decline reported last week.

Standard & Poor's said it will review public sector entities, such as universities, that invested with Madoff, to see whether their ratings should be cut as a result of their likely investment losses. -- REUTERS