[JURIST] A federal judge ruled Friday that investors who lost money in Bernard Madoff's [JURIST news archive] alleged Ponzi scheme can force Madoff into personal bankruptcy to recover lost funds. The ruling from Judge Louis Stanton of the US District Court for the Southern District of New York [official website] removes a restriction on Madoff's bankruptcy that was established by Stanton in a December 2008 ruling [SEC press release] granting a preliminary injunction and asset freeze against Madoff. Stanton's ruling was opposed [Bloomberg report] by the US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) [official websites], which argued that the appointment of a personal bankruptcy trustee would cause unnecessary delay and complexity to the Madoff proceedings.

Last month, Madoff pleaded guilty [JURIST report] to security fraud charges for his alleged involvement in a multi-billion dollar Ponzi scheme. In February, Madoff consented [JURIST report] to a partial judgment [SEC press release] with the SEC over civil charges brought by the SEC to obtain a preliminary injunction and asset freeze against him. The same day, then-SEC Division of Enforcement Director Linda Thomsen announced she was stepping down from her post [SEC press release]. In the week following Madoff's charges, then-SEC Chairman Christopher Cox [official profile] said that he would launch an immediate investigation [press release; JURIST report] into how the fraud allegedly perpetrated by Madoff went undetected for so long.