A company could be engaging in a pyramid scheme and still have GAAP financial statements, right?

I'm not saying it makes it right or that it really matters so much, but I'm just curious really... these investors in the Maddoff case were told they would receive X% per year "return" on their
investments... of course, what does return mean here and what were they really "investing" in? Did they just hand money over and were told to expect so much? Or did they receive stock of some sort? Is it the case that it is possible that financial statements could still be in conformity with GAAP yet there be a pyramid scheme going on?
Is it the auditors' responsiblity to catch pyramid schemes?
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