Banks to transfer $535 million to Madoff firm trustee

NEW YORK (Reuters) - Bank of New York Mellon Corp BK.N and JPMorgan Chase & Co JPM.N have agreed to transfer about $535 million to the trustee liquidating the brokerage of accused swindler Bernard Madoff, according to court documents filed on Thursday.

In the filings in U.S. Bankruptcy Court in New York, the trustee and the banks asked a judge to approve the transfers at a hearing on February 4, part of the trustee’s effort under the Securities Investor Protection Act to gather assets to be returned to defrauded investors.

Bank of New York Mellon would send a wire transfer of about $301.4 million, and JP Morgan Chase would send about $233.5 million to the court-appointed trustee by February 6, the court documents said. The accounts are held by Madoff’s brokerage firm.

New York lawyer Irving Picard is the trustee overseeing the liquidation of Bernard L. Madoff Investment Securities LLC, which collapsed after the 70-year-old Wall Street trader was arrested and charged on December 11 last year with securities fraud.

Madoff, a former chairman of the Nasdaq stock market, is under house arrest and 24-hour surveillance in his luxury Manhattan penthouse apartment as criminal and civil investigators probe his global operations that purportedly lost $50 billion.

The firm consisted of a brokerage and an investment division that Madoff ran separately in the same New York building. Madoff confessed to his sons in December that the investment arm was “a giant Ponzi scheme” with losses of as much as $50 billion, according to court documents.

A Ponzi scheme is one in which early investors are paid off with the money of new clients.

Madoff has not appeared in court to formally answer the charge, but he has until February 11 to be indicted or plead guilty under an agreement between prosecutors and his lawyers. That deadline could also be extended while the investigation continues.

The case is 08-01789 in U.S. Bankruptcy Court for the Southern District of New York (Manhattan).

Reporting by Grant McCool; editing by Jeffrey Benkoe