Bloomberg has information that federal investigators working to unravel Bernard Madoff’s alleged $50 billion Ponzi scheme - which clipped many wealthy investors - found evidence he ran an unregistered money-management business alongside his firm’s brokerage and investment-advisory units. The alleged scheme fell apart when Madoff failed to meet a reported $7 billion in redemptions.

Madoff, a former Nasdaq chairman, was charged in a criminal complaint last week, with a sole count of securities fraud - a charge that carries up to 20 years in prison. He has been released on $10 million bail. He reportedly has admitted the fraud.

According to the people, who declined to be identified or to name the funds because the probe is not yet public, clients of the undisclosed business appear to have included hedge funds.

Sterling Equities, a real-estate investment firm founded by Wilpon and Mets’ team president, Saul Katz, confirmed on Friday that it had invested with Bernard L. Madoff Investment Securities. The Wilpon Family Foundation is also affected.
In a statement, Sterling said: “Among our various investments, we have accounts managed by Madoff Securities. We are shocked by recent events and, like all investors, will continue to monitor the situation.”

Three feeder funds have been instrumental in keeping money flowing to Madoff in recent years - Fairfield Greenwich Group, Kingate Global, and the Tremont funds - which oversee about $15 billion in money invested with him.

The Fairfield Greenwich Website said: “We had no indication that we and many other firms and private investors were the victims of such a highly sophisticated, massive fraudulent scheme.”