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The huge $50 billion fraud allegedly perpetrated by Bernard Madoff, possibly the largest in history, has reached Israel, too. Among those invested in Madoff's funds and Ponzi scheme are an impressive list of Israeli insurance companies: Harel, Clal and the Phoenix.

Estimates of the insurance firms exposure are NIS 40 million for Harel, tens of millions of shekels for the Phoenix and approximately NIS 12 million for Clal.

The Technion also has lost money from its own exposure to Madoff and his scheme. It invested funds it raised from donations with Madoff and may have lost NIS 25 million.

Madoff, 70, was the former chairman of the Nasdaq, and treasurer of the board of trustees at Yeshiva University and chairman of the university's business school; he managed investment funds with over $17 billion in assets.

Madoff was arrested last Thursday by U.S. federal agents at his apartment after prosecutors said he told senior employees that his money management operations were "all just one big lie" and "a giant Ponzi scheme."

A Ponzi scheme is an illegal investment vehicle that pays off old investors with money from new ones and is dependent on a constant stream of new investment.

Because the invested capital is not earning a sufficient return on its own, such schemes eventually collapse under their own weight.

In recent years Israeli insurance companies have expanded their overseas investments significantly, as part of the change in investment rules dictated by the Fiance Ministry. The change was intended to allow the insurance companies to diversify their portfolios and vary their investments. The firms took full advantage of the treasury's changes and in certain periods even reached a level where 20% of their investments were overseas.

The Phoenix responded: "The company did not make direct investments with Madoff. We are examining whether indirect investments were made and to what extent."

Harel refused to comment.

The Technion responded: "The money the Technion lost was negligible compared to the amount of money managed by the institution."

Hedge funds seem to have taken a huge loss from Madoff's fraud. He said he had only about 25 customers, but it seems huge numbers of people were invested in his funds via other funds, and many had no idea they were exposed to Madoff.

Ezra Merkin of Cerberus Capital Management, who was very involved in the proposed sale of Bank Leumi to Cerberus-Gabriel, and is involved in a number of hedge funds, told customers last Thursday that almost all the assets of his Ascot hedge fund. Some $1.8 billion, were invested with Madoff, Merkin wrote his investors in a letter.

Merkin was the chief investment manager for the Gabriel fund during the period it was interested in buying a controlling share of Leumi from the state.

As for Madoff, he said the fund has hired lawyers to look into the matter.

The New York Jewish community was also a large victim of Madoff's apparent fraud.

Many of his investors were Jewish philanthropists and charities, many of whom seemed to have lost major amounts,if not all their money.

According to the court complaint, Madoff told his family he expected to end up behind bars, but wanted to execute his own version of a bailout package by doling out $200 to $300 million he had left to family, friends and employees. After the meeting, a lawyer for the family contacted regulators, who alerted federal prosecutors and the FBI.