Bernard Madoff took $10 million from a new investor only five days before confessing to an alleged $50 billion swindle, according to a new lawsuit.

Martin Rosenman, president of Stuyvesant Fuel Service, a private New York fuel company, is suing Irving Picard, the trustee supervising the unwinding of Mr Madoff’s business, for the return of $10 million. Mr Picard was this week given consent by a bankruptcy court to transfer $28.1 million from the $300 million left in Mr Madoff’s business, to cover costs of the fund’s liquidation. However, Mr Rosenman argued yesterday that the liquidator had no right to his cash, which he claims he transferred to Mr Madoff six days before it emerged that the fund manager had overseen what is believed to be the world’s largest financial scam.

Howard Kleinhendler, a partner in Wachtel & Masyr, which represents Mr Rosenman, said that he suspected that at the time that Mr Rosenman invested, Mr Madoff knew that he was close to being caught and was collecting cash in order to make a final distribution among friends and family.

The latest development in the alleged fraud came as the Financial Services Committee of the US House of Representatives prepared to question Wall Street regulators on Monday about how they missed the scam despite tip-offs from whistleblowers over more than ten years.

Mr Madoff was arrested on December 11, a day after apparently confessing to his sons that his investment business, Bernard L Madoff Investment Securities (BMIS), was “just one big lie” and was in fact operating as a Ponzi scheme, using cash from new investors to pay out fraudulent returns to existing investors.

According to Mr Rosenman’s lawsuit, filed with a New York bankruptcy court, he spoke to Mr Madoff on December 3 about investing and on December 5 he received details of an account into which to transfer cash.

On December 9, Mr Rosenman was told by BMIS that Mr Madoff had sold short $10 million in US Treasury bills on his behalf. Mr Rosenman, who claims that he had not authorised such a transaction, could find no record of it. In fact, the lawsuit claims, “BMIS never transacted a trade of US Treasury bills on Rosenman’s behalf”.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive