Dec. 12 (Bloomberg) -- Bernard L. Madoff, the investment adviser who allegedly called his firm “one big lie” before being arrested and accused of fraud, will be sued as early as today by a group including friends and neighbors of his who lost as much as $1 billion in total, lawyers said.

Some of the 70-year-old manager’s once-wealthy investors are now destitute and unsure how they’ll pay their rent, said two New York lawyers representing dozens of individual clients who live in New York and Florida.

“Many were members of his social community -- many were his friends,” Stephen Weiss, a lawyer with Seeger Weiss in New York, said today in front of the federal courthouse in Manhattan. The “panicked” investors include doctors and retirees, he said.

Madoff confessed to employees this week that the business bearing his name was “a giant Ponzi scheme” that cost clients $50 billion before two FBI agents arrested him yesterday morning at his Manhattan apartment. He’s free on a $10 million bond.

Madoff lulled his “risk-averse” investors into a false sense of security by reporting returns of 8 percent to 16 percent, even in bad economic times, according to another lawyer for investors, Brad Friedman of the Milberg law firm in New York.

Market Maker

Bernard L. Madoff Investment Securities LLC was the 23rd- largest market maker on Nasdaq in October, handling an average of about 50 million shares a day, exchange data show. It took orders from online brokers for some of the largest U.S. companies, including General Electric Co. and Citigroup Inc.

“We were struck not by the diversity of the people who put their trust in Madoff, but the amount of their net worth they entrusted with him,” Weiss said. Many of the investors entrusted a majority of their money with Madoff, the lawyers said.

Dan Horwitz, a lawyer for Madoff, didn’t immediately return a call seeking comment.

The U.S. Securities and Exchange Commission filed a civil lawsuit against Madoff yesterday. A hearing is scheduled later today in Manhattan federal court.

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.

Last Updated: December 12, 2008 15:01 EST