This is called a run on the bank, and when investments start to become illiquid this way, people lose everything.

United Capital Asset Management hedge funds halt withdrawals
Embattled hedge fund management group suspends redemptions from four funds following losses in subprime mortgages.
July 3 2007: 3:43 PM EDT

NEW YORK (CNNMoney.com) — United Capital Asset Management has temporarily suspended payments from four of its Horizon funds following losses from its investment in subprime mortgage bonds.

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In the past ten days, the firm received an unusually high number of redemption requests, including one from its largest investor which accounts for one-quarter of the firm’s assets under management.