SEC Shuts Down Bernard Madoff Client Recruiters Avellino & Bienes

A tip from a Seattle investment adviser suspicious of Avellino & Bienes' promise of steady returns of up to 18 percent leads to an SEC investigation into whether the two men are running a Ponzi scheme.

By now, Avellino & Bienes has more than 3,200 Madoff clients and has funneled $441 million to Madoff. But the two men are not licensed as investment advisers; according to Michael Bienes, Madoff didn't want them to register. "We were always captive to him," he explains to FRONTLINE. "He owned us."

On Madoff's recommendation they hire attorney Ira Sorkin -- a former SEC official who will later represent Madoff himself after his 2008 arrest. Sorkin tries to figure out a way to keep the men in business, but before he comes up with a solution the SEC runs out of patience and orders Avellino & Bienes to return Madoff investors' money and pay $350,000 in fines.

The Securities and Exchange Commission recently cracked down on one of the largest-ever sales of unregistered securities. Investors had poured $440 million into investment pools raised by two Florida accountants, who for more than a decade took in money without telling the SEC or making required financial disclosures to investors.

The pair had promised investors hard-to-believe annual returns of 13.5% to 20% -- to be obtained by turning the money over to be managed by an unnamed broker.