US prosecutors failed in their second attempt to have Bernard Madoff jailed, when a New York court rejected the Government's argument that the disgraced fund manager was a flight risk.

The prosecutors were appealing a decision on Monday that Mr Madoff could remain under 24-hour house arrest at his Manhattan penthouse despite breaking bail conditions that banned him from transferring his assets.

The $50 billion Ponzi schemer and his wife, Ruth, posted more than $1 million worth of valuables to friends and relatives over Christmas. Government prosecutors argued that this indicated that Mr Madoff was at risk of fleeing the country before he could be tried on fraud charges.

But Mr Madoff's attorney Ira Sorkin insisted that the Madoff's had innocently decided to distribute family heirlooms amongst loved ones. Mr Sorkin described the gifts as an "awkward attempt to reconnect with his estranged children". Mr Madoff is not thought to have spoken to his two sons since they reported him to the authorities last month after he confessed his $50 billion scam to them.

On Monday, the Madoff's were ordered by the court to submit a list of transportable assets currently in their possession.

District Court Judge Lawrence McKenna asked for a further inventory of valuables at other properties owned by Mr Madoff.

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