This article is more than 11 years old

This article is more than 11 years old

The renegade Wall Street fund manager Bernard Madoff could plead guilty as early as next week to swindling clients out of billions of dollars by running a Ponzi scheme masquerading as a $50bn investment empire.

A court document filed by US prosecutors today revealed that Madoff, 70, has waived a formal grand jury indictment - a step usually taken by defendants negotiating a plea bargain.

The US government will outline charges against him at an arraignment hearing in Manhattan scheduled for Thursday before a federal judge, Denny Chin.

A guilty plea by Madoff would amount to an admission that the once respected Wall Street fixer masterminded one of the biggest financial scams in history.

Madoff almost certainly faces a lengthy prison sentence, although a plea bargain could affect prosecutors' treatment of his family and could influence the type of jail in which he is incarcerated.

James Cox, a professor of corporate law at Duke University, said: "I can't imagine that he will avoid prison. There would be a huge outcry if he didn't go to jail. But he may be able to plea over the type of prison."

Madoff has been under house arrest at his penthouse apartment on New York's upper east side since December when was charged by the Securities and Exchange Commission with running a "massive" long-running fraud at his fund management empire.

At the time, prosecutors said he had confessed to his sons that his firm was "one big lie" and "basically, a giant Ponzi scheme". The authorities believe that his firm, Madoff Investment Securities, did virtually no trading but simply used new customers' deposits to pay out purported profits to existing clients.

There has been considerable speculation over the fate of Madoff's wife, Ruth, who, according to court papers, withdrew $15.5m from an account at a firm linked to Madoff Securities in the days running up to her husband's arrest.

In a legal filing this week, Madoff's lawyers sought to ring-fence $70m of assets which, they said, belong to Mrs Madoff, including the couple's New York apartment.

Mrs Madoff has not been charged with anything. Neither have Madoff's sons, Andrew and Mark, who were senior executives at Madoff Investment Securities.

Victims of the scam range from the Hollywood stars such as Kevin Bacon and Steven Spielberg to charities, hedge funds and prominent members of America's Jewish community.

Such is the vitriol over the case that Madoff recently wore a bullet-proof vest for his own protection to attend a court appearance. The author and Holocaust survivor Elie Wiesel, who lost his life savings in Madoff's fund, last week described the financier as a "psychopath", adding: "This man knew what he was doing. I would simply call him thief, scoundrel, criminal."

The fact that Madoff remains on bail has caused controversy. Richard Breeden, a former chairman of the SEC, expressed outrage today that he remains out of prison.

"Bernie Madoff should be in the worst prison and not in his apartment," Breeden said. "It may reflect an era in which the SEC was too light in its treatment of the scum who think stealing other people's money is acceptable behavior."

