There has to be more to the Madhoff story than meets the eye. First of all, he wasn't "exposed". He confessed. He was the one that shut it off. Second, he is still walking around with a shit-eating grin. Third, the split-strike conversion strategy DOES make money - just not as much as he claimed. Fourth, he had a very lucrative market-making and trading business - he did not need to run a scam. And last, the reported size of the investment side - $50 billion - is just too staggering large to be a Ponzi scheme over that many years. Can you imagine the amount of new investors he would have to attract to make the payouts? And how do you keep those new investors coming in a steady stream over ten years with no hiccup? Impossible.
Makes me wonder if Madhoff pulled of some insider deals, or had a pact with some untouchable political figure, or a "player" who gave him a choice between the devil and the deep blue sea. Maybe someone else was that hidden source and the real reason for his getting out of the game.