"If Madoff had billions of dollars from just a handful of investors, some of them should have had the know-how to spot what was wrong."

According to reports, some of them were "funds of funds". Having that know-how, and exercising it in the process of due diligence, is their only reason for existence. Some of these funds appear to have been wiped out by the Madoff collapse, but I would think the others should expect lawsuits over exactly this (apparent, alleged) lack of due diligence.

PALM BEACH GOT RUN OVER BY MADOFF'S PONZI REINDEER
(Grandma Got Run Over By a Reindeer)
WilliamBanzai7

(chorus)
Palm Beach got run over by Bernie Madoff's Ponzi reindeer
Just two weeks before Christmas Eve
You can say there's no such thing as a Wall Street scamster
But as for we in America, we believe

He'd been chalking up bogus Alpha
So the SEC said he had to go
And as he waltzed out of his lair on Third Avenue
Defiant as he was, he said, "Positive returns, hell no!"

When they woke up yesterday morning
It was clear the Palm Beach clique had been attacked
May as well stick a note to their own foreheads
Saying, "Oh Lord, please give us our money back!!"

(repeat chorus)

Now we're all so proud of our regulators
They've been taking this so well
See them crammed in Madoff's office
Knowing that SEC Chairman Cox will soon be sent to pink slip h-e-l-l

It won't be a Merry Christmas thanks to Madoff
Nor a Happy Hannukah as well
And we just can't help but wonder
Dosn't all of Wall Street have that pungent Ponzi smell?

(repeat chorus)

Now that Madoff's books are on the table
See all the other asset managers dance a jig (Ah!)
And the bogus billion dollar earnings
That not surprisingly had been rigged!

Be forewarned all you rich country club investors
Better watch out for yourselves!
You should not make be dreaming of serial Alpha
With hedge fund goofs who play golf better than yourselves!

(repeat chorus)