Ruth Madoff took $2m from London office before collapse

Serious Fraud Office investigates UK arm of Madoff's business

Ruth Madoff, the wife of Wall Street swindler Bernard Madoff, received $2m (£1.4m) in payments from the family's London business less than a month before his arrest, further drawing her finances into criminal investigations on both sides of the Atlantic.

The Serious Fraud Office in the UK yesterday characterised Madoff's London operation as "a cog in the giant washing machine", as it set out new details of how the former Nasdaq chairman ran his $65bn Ponzi scheme.

The SFO and the FBI in New York are each investigating who else might have known about Mr Madoff's illegal activities, which stretch back at least to the early 1990s. Mr Madoff claims he acted alone, and his wife has not been charged with any wrongdoing.

The $2m transfer to Mrs Madoff personally in late November was revealed yesterday by the SFO's Madoff case manager, Glyn Powell, in an update on the investigation.

At that time, her husband had been desperately seeking money to shore up his scheme. For decades, while pretending to be investing in the stock market, Mr Madoff had in fact been paying clients with the fresh money coming in from new investors. The scheme began collapsing last autumn as the new money dried up.

It emerged last month that Mrs Madoff also withdrew $5.5m from a brokerage account in the US at about the same time, and then took out another $10m on 10 December – the very day her husband made his confession.

Prosecutors in the US are seeking to seize property, including the couple's Manhattan penthouse and three other homes, which is held largely in Mrs Madoff's name. Mr Madoff, 70, was remanded in custody after pleading guilty to 11 charges earlier this month. Three counts of money laundering refer to the transatlantic transfers made between Madoff Investment Securities in New York and Madoff Securities International in London, which investigators believe were made to create the illusion of genuine investment activity and to boost profits at the share-trading arm of his business.

"MSI UK played a significant role in the operation of Bernard Madoff's investment fraud," Mr Powell said yesterday. "It was a cog in the giant washing machine."

MSI claimed to be a legitimate business set up just to invest the Madoffs' own money. Its offices were in the Mayfair area of London, which is home to many hedge funds, and its traders were monitored by CCTV by Mr Madoff from New York. The investigation by the SFO is examining whether anyone in the London office knew, or should have known, that the Madoff enterprise was a fraud. Its officers say that there are still many unanswered questions but that their work is making fast progress and they expect that any charges will be filed before the end of this year.

To date, the only other person to have been charged anywhere in the world in connection with Mr Madoff's fraud is his auditor, David Friehling, who was freed on bail in New York earlier this month. Mr Friehling was paid up to $14,000 a month by Madoff, but only "pretended" to audit his business, according to legal filings.

Mrs Madoff agreed to a freeze on her assets when her husband was bailed. She has hired a separate lawyer to represent her, since she is a party to numerous lawsuits from aggrieved investors.

Mr Madoff's fraud is the largest in Wall Street's history, hitting 4,800 clients, including charities and Hollywood celebrities. It has humiliated the SEC, which repeatedly investigated fraud allegations against Madoff yet failed to uncover the fraud.