Madoff jet may be sold in bankruptcy

NEW YORK (Reuters) - A Bernard Madoff company that owns one-half of a $25 million corporate jet has filed for bankruptcy protection, and the aircraft may be sold to benefit victims of the imprisoned Ponzi schemer.

Irving Picard, the court-appointed trustee liquidating Madoff's investment firm, made the Chapter 11 filing for BLM Air Charter LLC on Thursday in Manhattan bankruptcy court.

BLM's assets include a 50 percent stake in an Embraer Legacy 600 jet and a $770,000 bank account.

BDG Aircharter Inc, a unit of Syosset, New York, real estate company Blumenfeld Development Group Ltd, owns the other 50 percent stake in the jet, the filing shows.

Picard is trying to recover money for victims of Madoff's estimated $65 billion Ponzi scheme, and said he believes the jet can be sold for a "significant price."

It is not clear whether Blumenfeld wants the jet sold. The company referred a call for comment to an outside spokesman, who was not immediately available for comment.

According to published reports, Blumenfeld principal Ed Blumenfeld lost a significant sum investing with Madoff.

Picard said he filed the bankruptcy petition because Rolls-Royce Corp threatened to terminate a warranty agreement with BLM and BDG on November 13 unless it received $181,000 due.

The trustee said he wanted to halt the termination and avoid a potential "significant loss in value" to the aircraft.

BLM Air Charter has between $10 million and $50 million of both assets and debts, the filing shows.

According to Embraer's website, the Legacy 600 jet can seat 14 people and travel up to 3,400 miles.

Picard has recovered $1.4 billion of Madoff assets, but has identified $21.2 billion of investor losses.

A Saturday auction at a Manhattan hotel of items once used by Madoff and his wife Ruth may raise several hundred thousand dollars, also to benefit Madoff victims.

Bernard Madoff is serving a 150-year prison sentence in North Carolina.

The case is In re: BLM Air Charter LLC, U.S. Bankruptcy Court, Southern District of New York, No. 09-16757.

(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn and Tim Dobbyn)