There were probably some pretty bright people who got scammed by this guy. Not everyone knows the ins and outs of proper DD. You get to the point where you don't know who you can trust.
There were many people who got burned that didn't even realize they were invested with Madoff. They had their money invested with someone who in turn invested with Madoff.
The SEC is a flawed system, who are not looking out for the individual investor. The same SEC who delayed progress and came close to putting EXBX out of business IMO.
Throwing a random guess out there...maybe they didn't want people to know their millions weren't there in fear of bringing this economic mess alive sooner?