Some Madoff investors push swindler toward bankruptcy

NEW YORK (Reuters) - In a move to ensure that all of the personal assets of jailed swindler Bernard Madoff are used to pay his defrauded customers, some investors filed court papers on Monday to force him into involuntary bankruptcy.

A judge last week opened the door for the petition by reversing his December ruling preventing any such legal action, over the objections of U.S. prosecutors, the U.S. Securities and Exchange Commission regulator and a court-appointed trustee winding down the Madoff firm.

Monday's filing in U.S. Bankruptcy Court in New York was made on behalf of five investors claiming $64 million, according to court papers.

Their lawyers have argued that pushing Madoff into involuntary bankruptcy would make it easier for victims to recover any Madoff-linked assets that have been transferred to family members or third parties.

Madoff pleaded guilty on March 12 to running Wall Street's biggest investment fraud involving as much as $65 billion and is now in jail. He could be ordered to prison for the rest of his life at his sentencing, scheduled for June.

The case is In Re: Bernard L. Madoff 09-11893 U.S. Bankruptcy Court for the Southern District of New York (Manhattan).