U.S. presses to jail Madoff on diamonds and watches mail

By Grant McCool

NEW YORK (Reuters) - Accused swindler Bernard Madoff mailed $1 million (£662,000) worth of diamonds, watches and other jewellery violating a court order, U.S. prosecutors said on Wednesday while demanding the disgraced investment adviser be jailed.

As prosecutors pressed their case, the Securities Investor Protection Corp (SIPC) said some investors who may have been bilked by Madoff could start recovering funds in a few months.

The agency, created by Congress in 1970 to help investors who had accounts at failed brokerages, said it had mailed 8,000 claim forms to Madoff investors, but that it was too soon to know how many investors had been defrauded.

Authorities have said that Madoff confessed last month to running a Ponzi scheme for many years in which early investors were paid with the money of new clients, piling up losses of $50 billion.

In a brief filed in U.S. District Court in Manhattan in response to the government, Madoff's lawyers said he "simply did not realise" that mailing valuable personal items to family and friends violated a December 18 court order.

"Although Mr. Madoff had consented to the order, which prohibited Mr. Madoff from transferring assets, he simply did not realise that it pertained to these personal items," lawyers Ira Sorkin and Daniel Horwitz wrote.

They said every effort was made to return the jewellery.

Madoff, under house arrest and surveillance, was arrested and charged in December with security fraud.