Big investor gave a warning that 'Madoff could abscond'

A major investor with alleged fraudster Bernard Madoff told clients the former Nasdaq chairman "could abscond" with the money in the most explicit warning given by any of the so-called feeder funds.

Kingate Global, which channelled money to Bernard L Madoff Investment Securities to manage, flagged the risk to customers before the $50 billion (£33 billion) swindle was uncovered this month.

Madoff allegedly defrauded investors in a Ponzi scheme in what looks to be the biggest financial fraud ever. He remains under house arrest in New York. As well as warning of the risk to clients, Kingate said it would not check the accuracy of statements provided by Madoff, highlighting how he was able to get away with the scheme for so long.

It today also emerged that hedge fund Fairfield Greenwich, which had $7.5 billion invested in Madoff, is being sued by investors for allegedly failing to protect their assets.

The Greenwich Sentry fund invested $220 million with Madoff and the Fairfield Sentry fund $7.3 billion, jeopardising investors' interests while collecting "millions of dollars in fees", according to a complaint filed in New York State Supreme Court in Manhattan.

"FG defendants failed to perform even a minimum level of due diligence regarding the activities of Madoff," says the complaint.

Madoff's family is under renewed scrutiny. While there is no allegation family members did wrong, they have become central figures in the saga.

Sydelle Meyer, a member of the Palm Beach Country Club where the Madoffs were members, said: "They were nice, nice people. I knew them for 30 years. I never, ever would've believed it."

Charles Gradante, co-founder of a hedge fund advising firm in New York, said: "If you had to pick one of the nicest guys on Wall Street - and there aren't too many - he would've been one of them. He was not a ruthless, tycoon type."