BOSTON/NEW YORK (Reuters) - A judge froze the assets of disgraced Wall Street legend Bernard Madoff’s two sons and five executives who ran hedge fund portfolios that funneled money into his Ponzi scheme.
The order by Connecticut Superior Court Judge Arthur Hiller, issued Monday and made public Tuesday, prohibits them from selling homes or moving money, and marks the first time their assets have been frozen.
“This is an important step,” said David Golub, a lawyer representing the town of Fairfield, Connecticut, in a lawsuit against Madoff and the so-called feeder funds run by Tremont Group Holdings, Maxam Capital Management and Fairfield Greenwich Group.
The town’s pension funds charged in a lawsuit that the funds “knew -- or willfully refused to know -- that Madoff’s investment returns were not actually produced by his purported split-strike conversion strategy.”
Separately, a judge in New York denied an appeal by Madoff’s brother, Peter, to lift a freeze on his assets in a civil lawsuit. Peter Madoff had reached an agreement with U.S. authorities in December on an asset freeze, according to court papers.
Lawyers for Madoff could not be reached immediately for comment.
Authorities have charged the 70-year-old Madoff, a former Nasdaq stock market chairman, with operating the biggest investment fraud on Wall Street, cheating private investors, charities and pension funds out of an estimated $65 billion.
On Monday, Hiller ruled that Madoff’s sons, the last immediate family members whose assets had not yet been frozen, could have limited access to their money.
The order, effective until April 13, also covers the assets of hedge fund executives Walter Noel and Jeffrey Tucker, who together founded Fairfield Greenwich; Andres Piedrahita, a managing director at Fairfield Greenwich; Sandra Manzke, who ran Maxam Capital; and Robert Schulman, who once ran Tremont Group Holdings.
Maxam, an investment adviser based in Darien, Connecticut, was one of many funds that invested with Madoff. Tremont’s Rye Investment Management unit lost roughly $3 billion, virtually all of its assets to Madoff.
A hearing will be held on April 13, when Hiller’s ruling might be extended, according to Golub, the lawyer representing Fairfield.
The order will allow the individuals to meet their living expenses. However, they cannot sell their homes or move their money around, Golub said.
The sons and the executives have not been charged.
Madoff was jailed on March 12 after pleading guilty. He will be sentenced on June 16.
Prosecutors have charged only one other person, Madoff’s accountant, and have said they were investigating whether others were involved.
In late December, nearly two weeks after Madoff was arrested, the U.S. government allowed Peter Madoff to access $10,000 a month of his money to make mortgage payments and for other expenses. (Reporting by Svea Herbst-Bayliss and Grant McCool; editing by Phil Berlowitz and Jeffrey Benkoe)