Correct me if I'm wrong, but I believe no scam has involved both an investment firm and a custodian of that firm's assets. Madoff kept all assets and records in house, with no external custodian. They are a hedge fund, which allows them to force client to perform due diligence, without having to follow rules imposed on mutual funds.
https://personal.vanguard.com/pdf/s317.pdf"... the Investment Company Act of 1940. This act requires each mutual fund to place its cash and securities with a qualified custodian, typically a U.S. bank.
... These banks include The Bank of New York Mellon, Brown Brothers Harriman & Co., JPMorgan Chase Bank, and State Street Bank and Trust Company."
"your assets are protected through the Securities Investor Protection Corporation (SIPC)"
So if you invest in a mutual fund, that's covered under the 1940 act (you can also verify that on other sites besides Vanguard's). But hedge funds rely on investors savvy enough to do their own due diligence, and do not fall under the 1940 act.