Stephen Raven, the head of Bernard Madoff’s British operation, has called on Mr Madoff to confirm that he did not embezzle $150 million (£99 million) of the UK unit’s cash or, if he did, to own up and return the cheque.

Speaking to The Times, Mr Raven said that, on the advice of Mr Madoff, he sold the UK gilts that formed the bulk of the British operation’s assets in mid November, with the intention of spending the money on US Treasuries. Mr Madoff recommended switching from UK to US government bonds because of concern about the weakening value of sterling against the dollar, which was a perfectly reasonable course of action, Mr Raven said.

Madoff Securities International (MSI), the British operation that Mr Raven ran, followed its usual procedure when attempting to buy US Treasuries, conducting the transaction through Mr Madoff’s broking arm in New York. The broking arm confirmed at the time that the $150 million had been received and that the Treasuries were sitting in the account of MSI, a separate legal entity, which was owned by the Madoff family, who had provided the initial capital.

Mr Raven said that, at the time of the transaction, he had no reason to suspect anything was awry. As soon as the fraud was exposed last month, he became suspicious and contacted the US to inquire about the Treasuries. Nearly four weeks on, he has been unable to reach any representative of Madoff’s US operation by phone or e-mail and his inquiries have gone unanswered.

Mr Raven said: “In mid-November, at the request of Mr Madoff, we sold our holding in UK gilts and purchased through his New York firm $150 million of US Treasuries. We received a contract note and statements to confirm that the US Treasuries had been bought for the Madoff UK account.

“We then sent the money over to pay for them and, to the best of our knowledge and belief, we owned $150 million of Treasuries. The liquidators are now trying to find out where the Treasuries are.”

Mr Raven said that MSI is a creditor of the American Madoff broking operation, treating it just like any other counterparty, for example by paying fees and commissions for its services. As such, it is entitled to file a claim to retrieve its money if it is determined that the US Treasuries are not sitting in MSI’s accounts.

Mr Raven’s demand for clarification about the US Treasuries came a day after it emerged that federal investigators last month unearthed about $173 million worth of cheques in Mr Madoff’s desk “ready to be sent out”, according to prosecutors. It is thought that Mr Madoff planned to send the cheques to friends, relatives and employees, but was arrested by the FBI before he could do so. Some question whether the money to cover the cheques was that sent from London.

Mr Raven’s comments came a day after the Serious Fraud Office launched a formal investigation into “UK victims and any criminal offences that might have been committed in the UK” after accountants at Grant Thornton, the liquidators of MSI, handed it a report into the unit.

Meanwhile, it emerged yesterday that GMB Capital Management, of Boston, had liquidated its Low Volatility Fund after losing more than $50 million, about half its value, on bad bets including investing with Mr Madoff.

A US judge will announce on Monday whether Mr Madoff should remain under house arrest or be jailed while awaiting trial.

Costly affairs

1995
Nick Leeson, the original “rogue trader”, lost £827 million in speculative trading while working for Barings, bringing down the 233-year-old London bank in the process

2001
Enron's spectacular implosion led to one of the biggest fraud cases in history. Kenneth Lay, the company's founder, was found guilty of stealing more than £40 million of investors' money, but died before he could be sentenced in 2006

2007
Lord Black of Crossharbour, the disgraced media magnate, was sentenced to six and a half years in jail for embezzling millions of dollars from Hollinger International, the company that used to own The Daily Telegraph

2008
Jérôme Kerviel nearly brought down Société Générale as it was defrauded of £3.7 billion. He was said to have made €50 billion of unauthorised trades.

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