The impact of Wall Street’s alleged “pyramid scheme” of $50 billion is slowly unveiling, and could even impact some exchange traded funds (ETFs). ETFs could join a long list of those hurt by the fraud, including pensions, charities, hedge funds and large banking institutions.

Joe Bel Bruno and Jane Wardell for the Associated Press report that the alleged victims who sunk cash into Wall Street money manager Bernard Madoff’s investment pool include real estate magnate Mortimer Zuckerman, the foundation of Nobel laureate Elie Wiesel, and a charity of movie director Steven Spielberg.

Among the banking institutions involved are Britain’s HSBC Holdings PLC, Royal Bank of Scotland Group PLC and Man Group PLC, Spain’s Grupo Santander SA, France’s BNP Paribas and Japan’s Nomura Holdings. The pyramid scheme has robbed some of finance’s biggest players of $2 billion, with banks taking the biggest hit.

France’s BNP Paribas said Sunday its maximum potential loss was about $468 million; The Royal Bank of Scotland is out $600 million with hedge fund exposure; Banco Santander of Spain is exposed $23 million plus and Japan’s Nomura is out $303 million, according to CNN Money. HSBC is the largest victim at $1 billion.

A Ponzi, or pyramid scheme, is an investment fraud in which high profits are promised to investors from fictitious sources. Early investors are paid off with funds raised from later ones. Madoff was a former chairman of the Nasdaq exchange and was arrested last Thursday on a single securities charge for heading the $50 billion scheme.

Showing Page 1 of 2