Judge approves $28 million transfer from Madoff account
NEW YORK (Reuters) - A U.S. bankruptcy judge approved an agreement to transfer $28.1 million from a bank account of confessed swindler Bernard Madoff to the trustee liquidating Madoff's investment firm.
The agreement approved by a U.S. bankruptcy court judge in Manhattan was described by the trustee and the group overseeing the liquidation as an "initial recovery of assets" from Madoff, who is under house arrest on $10 million bail after being charged with securities fraud on December 11.
Richard Bernard, a lawyer representing the trustee, Irving Picard, said at a court hearing that if the funds turn out to be customer funds, they will be replaced.
"It will not impact returns to customers," Bernard said. He also told the court that "this is the first step of the ... trustee to recover assets."
The agreement calls for $29 million held in a Madoff bank account with Bank of New York Mellon Corp, minus $883,978 already transferred for pay and health care coverage, for a total of $28.1 million to be wired to the trustee.
The bank was not exposed to Madoff but he had accounts there, a bank representative said.
In a statement, Picard and Stephen Harbeck, president of the Securities Investor Protection Corp (SIPC), said "that to the extent these and other funds are 'customer property' ... they will be used for satisfying customer claims and not the administrative expenses of the Trustee."
After the hearing, Bernard told reporters, "There are other accounts we're investigating. We're looking everywhere for all assets."
Authorities say Madoff, a 70-year-old investment adviser and former chairman of the Nasdaq stock market, confessed to running a $50 billion Ponzi scheme in which early investors were paid off with the money from new clients.
The non-profit SIPC, which was established by Congress in 1970 to maintain reserves to help investors at failed brokerage firms, expects it will take several years to find the money in remote locations and sort through investor losses.
Scores of wealthy people and charities all over the world say they are victims, but the exact amount of money lost is not yet known in what could be the largest fraud in Wall Street history.
Some of the customers of Madoff's brokerage firm may be covered by the SIPC, but many others were indirect customers who invested in "feeder" funds that entrusted money to Madoff.
Investors have written to the judge handling the civil case against Madoff asking that he consider broadening access to SIPC to any investor whose money ended up with Madoff, either directly or indirectly.
"Giving relief just to the direct customers of Madoff's firm leaves out all those who are in the identical boat, because they invested with Madoff's 100 percent feeder funds," Daniel and Suzanne Goldenson of Bremen, Maine, wrote in a letter entered in the record in U.S. District Court in Manhattan.
The judge acknowledged the letter without indicating whether he would consider the request, according to court documents.
Since the Madoff scandal broke, investors have sued feeder funds seeking class action, or group status.
(Reporting by Emily Chasan and Grant McCool; Editing by Bernard Orr)
