Judge defers bail ruling on Madoff No. 2 DiPascali

NEW YORK Oct 28 (Reuters) - Epic fraudster Bernard Madoff's longtime deputy Frank DiPascali must stay in jail while a federal judge further considers whether to release him on bail, as the defendant and federal prosecutors have requested.

U.S. District Judge Richard Sullivan in August denied bail despite DiPascali's cooperation in the government's investigation of Wall Street's biggest investment fraud.

In a hearing on Wednesday, Sullivan said he will take more written submissions in the DiPascali case. He also said he was not convinced that both sides have shown that DiPascali has no incentive to flee, notwithstanding his cooperation.

DiPascali, 53, a lynchpin for prosecutors and FBI agents probing Madoff's decades-long fraud of as much as $65 billion, has been held since pleading guilty to 10 criminal charges.

Prosecutors and DiPascali's lawyers had asked Sullivan to release him into house arrest with electronic monitoring on a bond of $10 million. DiPascali faces up to 125 years in prison but is seeking leniency because of his cooperation.

The case is USA v DiPascali, U.S. District Court for the Southern District of New York, No. 09-00764.

(Reporting by Grant McCool; Editing Bernard Orr)