Several Jewish nonprofit groups have lost millions of dollars, and one has shut down, because they fell victim to the investment scheme allegedly put together by the financier Bernard L. Madoff, former chairman of the Nasdaq.

Charity experts say that his fraud will reverberate across the nonprofit world and serves as a reminder to charities that they need to keep a close watch on their investments and the people who are controlling them.

Mr. Madoff was arrested last week for operating a hedge fund that essentially worked as a $50-billion Ponzi scheme. His nonprofit victims include the Robert I. Lappin Foundation, in Salem, Mass., which announced on its Web site that its has been forced to close due to the incident.

“The money needed to fund the programs of the Lappin Foundations is gone. The foundation staff has been terminated today,” says the note from the group, which used to support Jewish youth projects.

Other nonprofit groups — and wealthy philanthropists — are likely to be hit hard financially by the scheme, write the co-authors of Philanthrocapitalism on their Values blog.

“The painful lesson in all this is that philanthropists, like everyone else, should do proper due diligence when investing their money,” writes Michael Green, an economist, and Matthew Bishop, an editor with the Economist magazine. “The fact that they are giving money away does not reduce the need for due diligence; rather, the fact that needy people will come to depend on it increases the responsibility of the philanthropist to properly check out whoever is trusted with looking after the money.”

The fact that Mr. Madoff was a well-known philanthropist should not have led investors to not look closely at his investing plan, they write. “Indeed, sad to say, if the money manager is a reassuringly high-profile philanthropist, the due diligence should probably be even more thorough than usual.”

Jack Siegel, a nonprofit lawyer in Chicago, argues that the problems with Mr. Madoff should remind charities of the basic rules of investing.

“The simple fact is that when it comes to money, nobody should rely on trust or personal relationships in lieu of solid internal controls,” he writes on his Web site, Charity Governance,

What do you think? What lessons can nonprofit groups draw from the incident? Click on the comments link below to share your views.