Just wrt Madoff, a lot of people who were smart enough to make real money in their lives were taken by him. Some may not be too bright, but that would be a long tail and there were surely some at the other end of the curved too. I asked a bigwig at a legit hedge fund once how they never spotted that he was a fraud, and his answer was that they couldn't reproduce his returns, so they figured he was smarter than them.