A Manhattan judge cleared the way for the newly filed Chapter 7 petition last week by granting a request from the same investors to lift a temporary order barring bankruptcy for Madoff. They had argued that a bankruptcy case was needed to protect their rights amid an ongoing scramble to seize his assets.
Madoff, 70, pleaded guilty last month to federal charges his secretive investment advisory service actually was a multibillion Ponzi scheme in which he paid longtime clients with money from new ones. He is jailed, awaiting a June sentencing for charges that carry a sentence of up to 150 years in prison.
Federal authorities already have begun forcing Madoff to forfeit property they allege was paid for by his fraud. In addition, a court-appointed trustee is liquidating assets from his securities firm to help play claims from thousands of burned investors.
The investors who sought bankruptcy believe it was the best way to make sure "all the property available would go to the victims," their lawyer, Jonathan Landers, said Monday.
They include a general partnership in Florida that claims it lost $30.2 million and another Madoff client who says he lost about $29 million in personal and charitable trust accounts. The claims are based on amounts listed in the last statements they received from Madoff - documents investigators say were fictitious.
Landers said he expected the bankruptcy court to appoint a second trustee to oversee distribution of his personal assets since Madoff "can't conduct his affairs from jail." A summons for Madoff listed his address as the Metropolitan Correctional Center in lower Manhattan.
In a document prepared for the Securities and Exchange Commission late last year, Madoff claimed he and his wife had $823 million in assets at the end of last year, including $22 million in properties stretching from New York to the French Riviera, a $7 million yacht and a $2.2 million boat named "Bull."
But the bulk of Madoff's assets, according to the document, consisted of an estimated $700 million value put on his investment firm.