Bernard Madoff’s ‘one big lie’ – a Ponzi scheme he says racked up $50 billion in losses – has trumped even Blagojevich’s bad behavior: Madoff’s Long Con is now number one on our Scandal Watch.

Madoff was arrested on Thursday on charges of securities fraud after his two sons turned him in.

Madoff allegedly operated the scheme from his investment advisory business, a nearly autonomous branch of Bernard L. Madoff Investment Securities. Federal investigators reportedly found evidence of another branch this weekend: an unregistered money-management business. Nobody is quite sure what else investigators are going to find because the company went largely unscrutinized by the SEC.

Madoff registered the investment advisory business with the SEC in 2006, but it hadn’t been inspected before Madoff’s arrest, despite the SEC’s goal of scrutinizing new advisors within their first year.

The SEC investigated the company in 2005 and 2007, following accusations from tipsters and news reports. (One prescient tipster wrote the SEC in 1999, "Madoff Securities is the world’s largest Ponzi Scheme.") The SEC found three technical violations in 2005 and no evidence of wrongdoing in 2007.

A rival firm also skeptical of Madoff’s too-perfect returns hired a private investigator who found that the accounting firm Madoff’s company used to monitor its billions until November 2006 "had only three employees, one of whom was 78 and lived in Florida, and another was a secretary, and that it operated in a 13 foot by 18 foot office."

Read more in Madoff’s Long Con.