Federal investigators are likely to take months trying to answer that question as they dig through the disgraced investor's records and attempt to unravel what may be the biggest financial fraud in history.
But several theories are being discussed among financial experts and at Wall Street watercoolers, Palm Beach Country clubs and the offices of university accounting professors.
Among the theories: Madoff lost a bundle in bad investments; paid some of the money out to investors; stashed cash in foreign banks; and spent some on his lavish lifestyle. There is also the possibility he inflated his claim of $50 billion in losses.
"He has plenty of houses and yachts, but not certainly enough to account for all this money," said Aswath Damodaran, a professor of finance at New York University. "It is tough to really lose 100 percent."
Madoff, 70, a former Nasdaq stock market chairman, has become one of the most vilified people in America since news broke Dec. 11 that he allegedly had been running a giant Ponzi scheme, paying returns to certain investors out of the principal received from others.
The scam included a global roster of investors, from retirees on Long Island to the International Olympic Committee, to charities worldwide. So far, investors have said that they have lost more than $30 billion, according to an Associated Press calculation.
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