This past week, Bernie Madoff pleaded guilty to one of the largest frauds ever perpetrated. It is estimated to total $ 65 billion. Thousands of people have lost millions of dollars each, and many have lost their life savings. Even as he read his guilty plea, it seems as if Madoff was more intent on covering his tracks than truly coming clean, as he tried to ensure the safety of his family and close associates. And the fact that he says that he knew for over a decade that he was one day going to be caught makes his continued fleecing of investors even worse! If you don’t know the story to which I am referring just Google Bernie Madoff fraud and you’ll have pages and pages of media reports to read through.

Yet, there is another side to this story that the media seems to be ignoring. Most of the people who invested with Madoff directly (including individuals, trusts, banks and brokers) were driven by greed and invested foolishly. Now I am not saying they deserved to be ripped off. And want to be clear that I believe Madoff is an evil and disgusting human being who deserves to be locked up for the rest of his life and have every cent he owns taken away from him. But this does not change the fact that most of the people who were sucked into his Ponzi scheme were greedy and foolish.

Let me explain. The people who invested with Madoff’s fund were promised extraordinary returns on their investment. In fact, they were insane returns, way above the market and vastly in excess of anything available anywhere else. Instead of questioning where these returns came from, the investors were blinded by the size of the potential jackpot. Something for nothing. Just give me your money, and I’ll increase it and give it back to you…. This is the basis of greed. No work involved. You don’t even have to understand how your money is being used. Just trust and start planning how to spend the jackpot.

In this respect, the investors made a mistake that has cost them badly. But, they were not only greedy. They were foolish too. They were foolish in at least two ways. Firstly, many of them broke the cardinal rule of investing: diversify. In fact, this is the first lesson you learn whenever you do formal studies or go on investment training courses: don’t put all your eggs in one basket. Diversify across different asset classes. But the promise of high returns helped to blind investment basics. Secondly, they were foolish because they did not do their homework. They did investigate the company to which they were giving their life savings. Now there were thousands of “small” investors who maybe did not have the ability or money to do the necessary due diligence. But the larger investors have no excuse.

Small investors were probably relying on America’s main financial regulator, the SEC. This was stupid, really, after the SEC’s recent run of not seeing a problem until it blows up in their faces. But again, larger investors should have done their homework. Eighteen months ago, a firm called Aksia looked into Madoff’s investment fund on behalf of its clients. Akisa was concerned by what it discovered. The main fund through which all the money was invested was being audited by an unknown accountancy firm, Friehling & Horowitz, based in Rockland county, in upstate New York. But its staff consisted of a 78-year-old retiree living in Florida, and an accountant and a secretary in a tiny office. Aksia also questioned the nature of the operations on the 17th floor of the Lipstick Building, and why staff at Madoff’s share-dealing arm were not allowed to enter this floor.

Ron Geffner, a partner at law firm Sadis & Goldberg told Fortune magazine recently: “It’s hard to imagine that given the amount of assets that he managed that people would not have been aware. If nothing else, employees, no matter what floor they were on, would have known that somewhere within the firm money was being lost.”

Did none of the investors ask any searching questions? And if they did so and were told that investment in derivative instruments was just too hard to explain, where they comfortable to put their money into it anyway? If so, they were greedy and foolish.

Let me say once again that I am appalled by Bernie Madoff. I am saddened that so many people have lost their life savings. I know that many people had money invested in Madoff’s scheme on their behalf with no knowledge of it – I am not talking about these people. But that does not cover even half of those who knowingly handed over money to Bernie Madoff, breaking the most basic of investment rules in the process. Madoff is not made less guilty by pointing this out. But the truth of this situation is a little more complex than a group of innocent people being ripped off by a rich fraudster. This story is a great picture of the whole problem we find ourselves in: greed, foolishness, weak regulators and unethical individuals and institutions have conspired to destroy the world financial system. When it recovers it will be different. It must be – for all our sakes.