Why were so many taken in the Madoff hedge fund scandal?

http://online.wsj.com/public/page/bernard-madoff.html

I am particularly interested in the psychology of what makes people make seemingly irrational financial decisions (i.e. no diversification).

Many individuals and non-profits had 90–100% of assets invested in this single fund, which apparently was a giant Ponzi scheme totaling 50+ Billion.

One thing that has been suggested is the exclusivity of participating in this fund. Not all who wanted to invest were welcomed. Hundreds were turned away.

Any references focusing on the psychology of investing would be appreciated.