Bernard Madoff allegedly took $10 million from a new investor just five days before he confessed his $50 billion swindle, according to a lawsuit yesterday that shed further light on the veteran fund manager's actions in the days before he was arrested for masterminding the world's biggest financial scam.

Martin Rosenman, the president of a private New York fuel company, yesterday sued Irving Picard, the trustee supervising the unwinding of Mr Madoff's business, for the return of his $10 million.

Earlier this week Mr Picard was given permission by the bankruptcy court to transfer $28.1 million from the estimated $300 million left in the coffers of the business, in order to cover the costs of the fund's liquidation.

But Mr Rosenman argued yesterday that the liquidator had no right to his cash, which he transferred to Mr Madoff less than a week before it emerged that the fund manager had overseen what is believed to be the world's largest fraud.

The latest development on the Madoff case came as the Financial Services Committee of the US House of Representatives prepared to grill Wall Street regulators on Mondayover how they missed Mr Madoff''s alleged $50 billion fraud despite tip-offs from whistleblowers over more than 10 years.

Mr Madoff was arrested on December 11, a day after apparently confessing to his sons that his legendary investment business, Bernard L Madoff Investment Securities (BMIS), was “just one big lie". Mr Madoff had for years used new investors' cash to pay out fraudulent returns to existing investors.

According to the suit filed yesterday with a New York bankruptcy court, Mr Rosenman, who was investing on behalf of a family trust, spoke to Mr Madoff by telephone on December 3 about putting money in the fund manager's seemingly phenomenally successful fund.

Mr Madoff told Mr Rosenman, who had not previously invested with the fund, that the fund was closed to new contributions until January 1, 2009, but suggested that Mr Rosenman could wire money before that date into the BIM company account.

In his law suit, Mr Rosenman alleges that one of Mr Madoff's employees, Jodi Crupi, sent him a fax on December 5 with details of a JP Morgan Chase account into which he could transfer his cash.

On December 9, Mr Rosenman received a letter from BMIS to inform him that Mr Madoff had sold short $10 million in US Treasury bills on the investor's behalf. The letter contained an identification number for the transactions.

Mr Rosenman, who claims that he had not authorised such a transaction, made multiple electronic searches for the transaction Mr Madoff said that he had made but found no record of it.

Ms Crupi, meanwhile did not return Mr Rosenman's call requesting clarification of the transaction.

"In other words, BMIS never transacted a trade of US Treasury bills on Rosenman's behalf," the law suit said.

Although Mr Rosenman had not previously invested with Mr Madoff, they appear to inhabit similar social circles. Both Mr Rosenman and Mr Madoff's younger brother, Peter B Madoff appear on the 2004 honour roll of donors to the North Shore Long Island Jewish Health System, having donated up to $499,000 each to the charity. Peter B Madoff was the chief compliance officer of his brother's brokerage business.

Mr Madoff is known to have used his connections with wealthy Jewish families to seek new victims for his Ponzi scheme.

Stuyvesant Fuel Service was founded in 1934 and is one of the biggest independent heating oil distributors in New York. The company also has a natural gas division called Stuyvesant Energy.

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