The judge's decision leaves accused swindler in his $7 million penthouse to await trial while investors like Larry Leif, who says he was cheated out of his life savings, are outraged, reports CBS News correspondent Randall Pinkston.
"He's scamming the government, he's scamming the judge," Leif says. "The only way you're going to stop Mr. Madoff is to put him in jail, just like any other criminal,"
In his 22-page order, Judge Ronald Ellis acknowledged investor outrage, but said the government did not "demonstrate either a serious risk of flight or serious risk of obstruction of justice."
While Madoff remains out of jail, the judge tightened conditions on his bail agreement:
Madoff is barred from leaving his apartment except for court appearances, Pinkston reports. And that could be mid-February, when the U.S. Attorney is scheduled to file his indictment.
The ruling further outraged investors who have been clamoring for Madoff to be sent to jail for allegedly carrying out the largest financial fraud in history. They find it shocking that Madoff is free on bail, despite distributing assets that could be used to help repay investors who lost billions.
Stephen A. Weiss, a lawyer for several dozen Madoff investors, said there "are people on the street who are very unhappy" with the ruling.
"There is a thirst for blood that transcends just those who have been victimized. There is a feeling ... that folks like Bernard Madoff get a different brand of justice than the guy in the street," Weiss said.
Defense lawyer Ira Sorkin says the bail opinion "speaks for itself and we intend to comply with the judge's order." Sorkin has said the gifts were an innocent mistake and said he is neither a danger to the community nor a threat to flee.
In a separate decision, another magistrate signed off on an extension for the deadline to indict Madoff until Feb. 11. That means Madoff will remain free for at least another month, provided he does not violate conditions of the bail.
The judge also noted that it is quite common for defendants to be granted bail, even those charged with violent offense.
"Even for the most serious offense, more than half of all defendants are released on bail conditions, including 51 percent for violent offenses, 57 percent for property offenses and 73 percent for fraud."
In another development, a bankruptcy judge ruled that a trustee can issue subpoenas to investigate the flow of money in the investment fund run by Madoff. U.S. Bankruptcy Judge Burton Lifland gave permission to the trustee, Irving Picard, to subpoena witnesses. The trustee is overseeing the liquidation of the fund for the bankruptcy court.
Last week, prosecutors said investigators found 100 signed checks worththat he was ready to send out to his closest family and friends at the time of his arrest last month in what is alleged to be largest financial fraud in history.
Prosecutors said the checks were further evidence that he wants to keep his assets away from burned investors in a more than $50 billion fraud.