Madoff breaches trust ... or?

The swindle perpetrated by Bernard Madoff, who has confessed to running an investment Ponzi scheme seems almost like an exclamation point to an era of greed spurred (I believe) by a loose-money Fed and other federal interventions. One way or another the country is unlikely to feel as affluent in the next few years as it has felt in the previous decade or so. Anne Applebaum had some especially thoughtful comments recently, suggesting that a market economy to a great extent runs on trust, and Madoff breached trust big-time and in a public way, and it's likely to make people a little less trusting, perhaps a bit less entrepreneurial for a while. I hope she's wrong, but . . .

Incidentally, there's a theory going around the Internet that Madoff actually didn't run a Ponzi scheme but that his hedge fund lost big-time (as others did) and he concocted the Ponzi story, perhaps because his investors could get compensation for losses to fruad from the government, whereas they couldn't have recouped hedge-fund losses. Seems far-fetched (I'll run donw the links in the next day or so), but what do you think?