The government won a battle Monday in its effort to maintain control over Bernard Madoff’s assets when a judge protected the assets from being disturbed by investors seeking to force the jailed financier into personal bankruptcy.
U.S. District Judge Denny Chin signed a restraining order preventing more than $100 million in personal assets from being moved, sold or dissipated.
Chin said the order was necessary because there is probable cause to believe the property would be subject to forfeiture to the U.S. government because of crimes committed by Madoff.
Madoff pleaded guilty to fraud charges last month before Chin, who is scheduled to sentence the 70-year-old former Nasdaq chairman to up to 150 years in prison in June. He admitted losing billions of dollars on behalf of thousands of investors.
Some investors, worried that any assets found to be unrelated to the fraud might not benefit investors, said they want to force Madoff into personal bankruptcy proceedings to protect them.
The government argued that the step was unnecessary because it plans to liquidate assets and distribute the proceeds equally to investors. Another federal judge cleared the way for the investors to file the personal bankruptcy proceeding.
U.S. Bankruptcy Judge Burton R. Lifland on Monday ordered the appointment of a temporary trustee to handle issues regarding assets that must be protected for the case to force Madoff into personal bankruptcy that was brought last week by several investors.
Lifland ordered the temporary trustee to coordinate with a trustee overseeing the bankruptcy case involving Madoff’s business assets so that any disputes over what happens to assets and how claims can be made are resolved.
Madoff’s attorney, Ira Sorkin, had argued against the appointment of an interim trustee, saying that the individual “will be unable to marshal any assets.” He said the appointment also will complicate the efforts of the U.S. attorney, the Securities and Exchange Commission and others who are liquidating the assets for investors.
In the document, Sorkin said Madoff cannot violate any restraining orders preventing the movement of assets since he is in prison.
Sorkin, who represented Madoff’s wife, Ruth, until several weeks ago, said he had spoken to Mrs. Madoff’s lawyer and they both agreed that she owns certain assets “free and clear of any wrongdoing by Mr. Madoff, or to which she has a legitimate, untainted fractional property interest.”
Sorkin said that neither the $7 million Manhattan penthouse where Mrs. Madoff resides or a $3 million home in Montauk have been forfeited. But he said an $11 million Palm Beach, Fla., house owned by Mrs. Madoff has been seized by the U.S. attorney with the consent of Mrs. Madoff and it will be sold by the U.S. Marshall Service.
The government has said Mrs. Madoff intends to hold onto up to $69 million in assets, including the penthouse and financial accounts in the name of Mrs. Madoff.