Reuters – Top former Merrill Lynch executives, including two former CEOs, invested in hedge funds that lost money with alleged fraudster Bernard Madoff, becoming the highest-level Wall Street victims of the scandal to date, the Wall Street Journal reported on Thursday.

Former chief executives Daniel Tully and David Komansky and former investment-banking chief Barry Friedberg personally invested in the funds, set up by former Merrill brokerage chief John Steffens, the paper said, citing people familiar with the matter.

Bernard L. Madoff Investment Securities LLC collapsed after the 70-year-old Wall Street trader was arrested and charged on December 11 last year with securities fraud.

Madoff, a former chairman of the Nasdaq stock market, is under house arrest and 24-hour surveillance in his luxury Manhattan penthouse apartment as criminal and civil investigators probe his global operations that purportedly lost $50 billion.

The firm comprised a brokerage and an investment division that Madoff ran separately in the same New York building.

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CNBC – The hedge fund industry has been battered this year, suffering heavy losses in part due to redemptions by investors as they asked for their money back amid the market turmoil.

According to a Singapore-based hedge fund research firm Eurekahedge, the industry has lost some one-fifth of its assets this year to $1.55 trillion. About $125 billion of the losses came from redemptions.

The scandal surrounding Bernard Madoff is certainly not helping the industry. The investment adviser and former Nasdaq stock market chairman has allegedly swindled clients out of $50 billion through a bogus fund. It’s forgivable if seasoned high-net worth investors get cold feet and steer clear of this form of investment.

Stephen Gollop, CEO of Tyche, expects one-third of the hedge funds to disappear in the first-quarter of next year.

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