As news trickles out about the fraud allegedly perpetrated by Bernie Madoff and his hedge fund "ponzi scheme" that prosecutors say could amount to up to $50 billion in losses, many buy side traders were in disbelief.

Many traders were mad, some passionately and personally upset. One trader at a large investment management firm was quite vocal about his complete shock and anger towards Madoff and the situation.

"I've begun to lose faith in this business and I no longer know who to trust or who the people I trust really are," he says. "What has happened to this industry's integrity? How did we get to this place and how the hell are we going to get back to where we belong?"

So how did such a reputable Wall Street veteran end up carrying out such a terrible scam? That's what buy-side traders can't seem to figure out.

Michael Levas, founder, CIO and managing member of Olympian Capital Management, says he doesn't grasp how so many checks went wrong. "This is a major fund, how didn't the accountants or the legal team or the Board of Directors say what is going on why don't we have a reputable firm auditing our numbers?" he asks.

"With numbers coming out at 8 percent consistently that should have set up a red flag," says Levas. "It's unbelievable how they let this go, this is a fraud of monumental proportions."

He says it creates a negative feeling for everyone on the Street from brokers to market makers and particularly hedge funds. But Levas does say prior to yesterday, "I'd heard he was a great guy and he was very philanthropic but obviously got in way over his head and he should have come clean."

Levas says he's very upset about the situation as a reflection on the industry as a whole. "This is the frosting on the cake for the bottom of the market," he adds.

Levas has long said his biggest fear coming out of the credit crisis will be over-regulation and now he feels it's going to be even worse. "The regulators are going to have a field day with this," he says. "Former SEC Chairman Levitt recently said that the soft regulatory system doesn't work and now everything we have stood for in the capital markets has been disintegrated."

Ultimately Levas says the only way to restore confidence and turn around the industry is through "an SEC that does things correctly." He says the only way to achieve this is through regulatory bodies that don't involve political appointees.

He says it's important to have practitioners from the field, those in the industry who understand the business, setting the regulatory tone and making real change.