NEW YORK (Reuters) - The Bank of New York Mellon Corp BK.N has agreed to transfer $28.1 million from an account of confessed swindler Bernard Madoff's investment firm to pay for liquidation costs, according to court papers.

Irving Picard, the trustee of the Securities Investor Protection Corp overseeing the liquidation of Bernard L. Madoff Investment Securities LLC, “is in urgent need of funding for immediate costs of administration,” the December 26 filing in U.S. Bankruptcy Court in Manhattan said.

It said the agreement called for $29 million held in the bank’s account, minus $883,978 already transferred for employee pay and healthcare coverage, to be wired to the trustee.

A Bank of New York Mellon Corp representative said the bank was not exposed to Madoff but the investment adviser held an account with the bank.

A hearing was scheduled for Tuesday before U.S. Bankruptcy Judge Burton Lifland to approve the agreement. Two weeks ago, another judge ordered liquidation of the firm under the Securities Investor Protection Corp, a nonprofit group created by Congress in 1970.

A lawyer for the trustee was not available to comment. Madoff’s lawyer was not available to comment.

In another move in bankruptcy court, the trustee is taking steps to sell the market-maker business run by Madoff, who was arrested and charged with securities fraud on December 11 after authorities said Madoff told them he had been operating a “Ponzi” scheme for years with estimated losses of $50 billion.

The court gave approval to the trustee this week to share confidential information with potential buyers of the firm.

A Ponzi scheme is one in which early investors are paid with the money of new clients. Madoff’s dealings ensnared rich people, banks and charities all over the world.

The exact amount of money lost by Madoff is not yet known, but investigators may have a better idea of his firm’s worth by Wednesday.

On December 18, a U.S. District Court judge in Manhattan ordered Madoff to provide a verified written accounting of his firm’s records to the U.S. Securities and Exchange Commission by December 31.

These include “all assets, liabilities and property, bank accounts, brokerage accounts, investments, business interests, loans and lines of credit” according to the order in the civil case brought by the SEC.

Madoff, 70, who has not appeared in court to answer the criminal complaint, is confined to his Manhattan apartment 24 hours a day with security cameras trained on the doors “to prevent harm or flight” according to a court order.

The cases:

USA v. Madoff 08-02735, U.S. District Court, Southern District of New York (Manhattan)

Securities and Exchange Commission v. Madoff et al 08-10791, U.S. District Court, Southern District of New York (Manhattan)

Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).