Madoff's attorney, Ira Lee Sorkin, had appealed the decision to hold Madoff at the Metropolitan Correctional Center in lower Manhattan until his sentencing. Rather, Sorkin argued at a hearing before the Second Circuit Court of Appeals on Thursday, Madoff should be allowed to return to house arrest at his $7 million apartment on the Upper East Side.
Sorkin argued that Madoff had thus far cooperated with the terms of the house arrest, turned in his passport, and that he was not a flight risk.
"There was never any evidence he was about to flee," Sorkin said.
Assistant U.S. Attorney Marc Litt said there is a difference between private security and federal prison. The guards could fall asleep, Litt argued, or be subject to "financial inducements." Litt said Madoff "has a history of deception" that merits his continued detention.
The judges agreed with Litt.
Click here to read the judges' order on Madoff.
"The defendant has a residence abroad, and has had ample opportunity over a long period of time to secret substantial resources outside the country," they wrote.
Court Releases Angry Letters from Victims
Angry and emotional letters written by Madoff's investor victims pleading with the court to put the financial scammer in jail were unsealed Friday. United States District Judge Denny Chin invited victims to write letters or testify in court during Madoff's hearing on March 12. Over 100 e-mails and letters were sent to the court.
Click here to read some of the ltters from Madoff's victims.
"When you consider sentencing Madoff, please consider that many of us will live within our own jails because of Madoff," wrote Robert Shapiro. "We are emotionally forever damaged, and forever economically devastated."
Shapiro signed the letter "Madoff Victim For Life."
"We are immersed in a financial nightmare and have had to change our lives. I am no longer retired, but looking for work, not an easy thing for someone my age in this economic environment," one person wrote whose name was redacted to protect his privacy.
Following his guilty plea last week Madoff told the court "I cannot adequately express how sorry I am for what I have done."
Laura Stein, 63, said she and her husband had considered themselves fortunate when they opened an account with Madoff.
"We felt like we were the luckiest people in the world because we certainly weren't millionaires," Stein said. "We thought he would never bother with small potatoes like us."
Stein, who says she invested with Madoff for 21 years, expressed her outrage over the failure of the government to recognize the scheme.
"The SEC, FINRA and the IRS have been shamefully negligent toward us. Please, we need your help," she wrote.
Other letters expressed anger towards Madoff's wife, Ruth.
"Allowing Ruth Madoff to keep 62 million dollars and additional assets would seem to me to be a total miscarriage of justice," wrote one person, referring to a court filing in which Ruth Madoff requested to remain in the couples' $7 million penthouse and keep $62 million after her husband went to jail.
Madoff Investigation Continues
Meanwhile, the investigation into Madoff's possible accomplices continues. Madoff's sons and wife Ruth were all put on guard earlier this week when prosecutors made it clear they intend to seize money and assets from the entire Madoff family.
Neither son, nor Ruth, has been ruled out by investigators though Madoff continues to insist he worked alone.
Court filings last week put the Madoffs' personal worth at $823 million. Investigators have recovered about $950 million in cash and securities from the company. Prosecutors estimate Madoff's Ponzi scheme could have cost his investors anywhere from $50 to $65 billion.