This blog post originally appeared on RealMoney Silver on Dec. 12 at 8:59 a.m. EST.While many are suggesting that the failed auto rescue plan is responsible for the dramatic overnight drop in the futures (down by nearly 5%), I believe that the alleged Madoff fraud might be even more responsible for the dire overnight market decline. If the Madoff story is correct, it is the single biggest financial story of the year. Indeed, it is bigger than Enron or Tyco, bigger than Boesky and far bigger than Bayou. It attacks at the core of investor confidence, which has already crumbled and remains very fragile. About three years ago, an investor of mine, who already was an investor with Madoff, came to me and asked my advice as to whether he should add to that investment. I requested and received his monthly brokerage statements. Now, I am very good with math, but after hours of analysis over a weekend, I could not understand how he generated his returns and suggested that he should withdraw his capital. (The investor discarded my advice and decided to add materially to his investment.) Piecing together information over the last 12 hours from several Madoff investors and acquaintances suggests that the following events might have transpired. While the criminal complaints filed against Madoff estimated losses at $50 billion, the fraud likely was closer to the amount that was managed by his company at between $17 billion and $25 billion. My friend, Charlie Gasparino, was on CNBC earlier this morning saying that the company employed leverage, but I doubt it was of the magnitude that would cause a $50 billion fraud. That being said, these days, I guess you never know!