Madoff Remains Free, Judge Rules

"Mr. Madoff gathered a number of watches that he collected over the course of years, knowing that, due to the sudden change in his circumstances, he would never have an occasion to wear these watches again," according to a brief filed by Madoff's attorneys, who say packages were sent to the Madoffs' sons, a daughter in-law, Madoff's brother and sister in-law, Mrs. Madoff's sister and a married couple who are close friends.

Madoff, say his attorneys, "simply did not realize" that the SEC order he consented to "pertained to these personal items". The jewelry has all since been recovered, according to Madoff's lawyers.

Madoff was arrested on December 11th and his intitial bail conditions left him free to come and go as he wished during daytime hours, with restriction to his home only at night. Within a week those conditions were changed and on December 18th, Madoff was restricted to his home on a 24 hour basis.

In another development in the case, the prosecution and defense agreed this past weekend to extend the time within which the prosecution could continue developing its case without either seeking an indictment or submitting to a preliminary hearing. Madoff was charged in a federal complaint, and under the court guidelines, the government had 20 days in which to make a case. That time frame has expired, but as is often the case, the two parties agreed to give the government more time. The preliminary hearing rule would have required the government to present its case today. It now has until mid-February. And the judge has the right to grant additional extensions.

Prosecutors Wanted Madoff Behind Bars

Last week prosecutors argued that Madoff should be put in jail immediately saying that when Madoff's desk was searched following his arrest, investigators found approximately 100 signed checks totaling more than $173 million "ready to be sent out".

"The only thing that prevented the defendant from executing his plan to dissipate those assets was his arrest by the FBI," prosecutors said. "The defendant's recent distribution of jewelry and watches demonstrates a continuing intention to benefit those close to him to the detriment of his victims."

An earlier court order barred Madoff from "dissipating, concealing, or disposing of any money" or "personal property".

Was Madoff Running a Ponzi Scheme?

Madoff made headlines last month when an unsealed criminal complaint in federal court in New York charged that he has been running a decades long Ponzi scheme that defrauded investors of $50 billion dollars.

A former chairman of NASDAQ, Madoff was an investment advisor who catered to a handful of high net worth clients, one of whom told ABC News that Madoff was so sought after that, as recently as two months ago, he was turning down potential new business. His handful of clients routinely expected -- and received -- double digit returns, up market or down.

Bernard Madoff Investment Securities and the SEC

According to a SEC document filed in Jan. 2008, and cited in the complaint, the firm had between 11 and 25 clients for the fiscal year ending Oct. 2007 and managed about $17 billion in assets in 23 different accounts.

Bernard Madoff Investment Securities, in addition to that private client practice, is also a market maker that trades with other dealers in bonds, the S&P 500 and NASDAQ, according to Bloomberg News.

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