A Friendly Fraud

It's being described as an agency breakdown. The chairman of the Securities and Exchange Commission admits it failed over many years to investigate credible allegations of wrongdoing by money manager Bernard Madoff. Now the regulators and Madoff's former clients are trying to determine how he duped friends, family and savvy investors for so long.

It may take many months for investigators to fully understand Madoff's $50 billion ponzi scheme. But friends and investors from Hollywood to Palm Beach, Fla., may never be able to reconcile the man they knew with the scam he's alleged to have run, reports CBS News correspondent Bianca Solorzano.

"When my wife's sister passed away, Bernie Madoff came to the funeral. That was the type of individual that we all thought he was - a very caring individual." said Norman Braman, former owner of the Philadelphia Eagles and Madoff investor.

Braman said Madoff never appeared too eager to accept new investment money.

"You had to know somebody - a friend of a friend who had some influence for Madoff to accept an account. I mean, this was a classic scam," said Braman.

Meanwhile, the nonprofit corporation tasked with poring over Madoff's records says he kept multiple sets of books. And the government has set up a hotline for people who believe they are victims of this fraud.

Though he socialized with a wealthy set, Madoff's own lifestyle wasn't overly lavish.

Bob Lenzner of Forbes magazine said Madoff's lifestyle was not "flamboyant."

"He didn't have big fancy yachts. It was a combination of factors - what he looked like, his manner, his supposed record, the fact that he was a philanthropist."

For Francis Levy, the director of an educational center that had virtually all its funds invested in Madoff's securities, the revelation was a "huge punch in the stomach."

"It is a personal punch in the stomach because this is someone I knew and still have affection for."

Levy said the deception is hard to believe.

"Is it possible that he is a sociopath that cares nothing about human beings? And I can't believe that."