New York Magazine has an article up about Madoff's life in jail. I was most interested in the part where he revealed how he started.
Madoff said. He insisted that he’d been “a good trader” with a solid strategy, explaining that he’d stumbled into trouble because of his success. Hedge funds—“just marketers,” he said with evident disgust—pushed cash on him. He overcommitted, got behind, and generated a few imaginary trades, figuring he’d make it up—and never did.
It seems that a lot of these fraudsters initially thought "I just need to buy myself time to make back my losses."