The Serious Fraud Office (SFO) has launched an investigation into the UK business of Bernard Madoff, the US fund manager behind an alleged $50 billion fraud.

The focus of the investigation will be on British victims and any criminal offences that might have been committed in the UK, said the SFO, which is liaising closely with its American counterparts and City of London Police.

The decision comes a month after Mr Madoff was arrested in the US and because of concerns about the “robustness of Madoff's UK operations,” the SFO said, it is urging “investors or other stakeholders involved with the Madoff UK businesses to come forward."

Richard Alderman, director of the SFO, said: “We will work closely with other law enforcement agencies to discover the truth behind the collapse of these huge financial structures. And we again ask for help from ex-employees and others."

The decision follows the SFO's receipt of an interim report by Grant Thornton, the provisional liquidators of Mr Madoff’s business in the UK.

Mr Madoff took $1 million from an investor just three days before he was arrested on December 11 for running the world's largest Ponzi scheme, according to a law suit filed today.

Hadleigh Holdings, a Miami company, wants Irving Picard, the trustee that is unwinding Bernard L Madoff Investment Securities (BMIS), and JP Morgan Chase, where BMIS had a bank account, to return the $1 million.

In the filing with the US Bankruptcy Court in Manhattan, Hadleigh said that its manager Stanley Krieger began thinking about investing with Mr Madoff several months ago after the fund manager was recommended by Mr Krieger's by friends and colleagues for his stable investment returns.

As a result, Hadleigh transferred $1 million to BMIS's JP Morgan Chase account so that it could be invested in Mr Madoff's funds.

Hadleigh claims, however, that Mr Madoff never obtained legal possession of the money and therefore the cash it should not be included as part of the BMIS liquidation.

Another investor, Martin Rosenman, who wired $10 million to Mr Madoff less than a week before he was arrested, made a similar claim against Mr Irving and JP Morgan Chase last month.

Faced with about $7 billion in redemptions, it is thought that Mr Madoff made desperate last minute attempts to gather enough cash to meet the demands of existing investors in the weeks before he confessed his scam to his sons and was subsequently arrested,

Yesterday it emerged that he took $250 million from one of his closest friends just weeks before he was arrested.

Mr Rosenman and Hadleigh hope that, because they put their cash in towards the end of the scam, it may still be sitting in the JP Morgan Chase bank account.

Mr Irving is currently untangling the assets remaining at the company, while Mr Madoff remains under 24-hour house arrrest at his penthouse in Manhattan. He has so far uncovered $830 million in cash and a further $850 million in liquid assets.

Eventually, these assets will be shared amongst the investors that lost as much as $50 billion in the financial scam.

Mr Madoff's lawyer Ira Sorkin today declined to comment on Hadleigh's claims.

US prosecutors have called for Mr Madoff, who apparently confessed to his sons last month that he had been running a Ponzi scheme, or a fraud in which he used funds invested by new clients to pay fake returns to existing clients, to be jailed until his trial as he poses a “danger to the community,” according to a written court motion made public yesterday.

Mr Madoff, 70, is on bail and is under house arrest at his $7 million apartment in Manhattan.

It emerged earlier this week that Mr Madoff had posted valuables worth $1 million to relatives over Christmas. His sons then informed the authorities that their father had mailed the "heirlooms", prompting prosecutors to call for Mr Madoff to be jailed immediately.

In packages to his sons and brother, Mr Madoff sent 13 watches, made by jewellers including Cartier and Tiffany, as well as an emerald ring, a diamond necklace, a jade necklace, a diamond bracelet, a diamond broach and two sets of cufflinks.

Mr Madoff’s lawyers claim the items were sent innocently and were not an attempt to move any assets while investors who lost money try to recover their cash.

Many top financial institutions, such as HSBC and Santander, have admitted exposure to Mr Madoff's funds as well as celebrities including Kevin Bacon, the film actor.

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