Dec. 19 (Bloomberg) -- A request to freeze assets of Ezra Merkin, whose Gabriel Capital LP and Ascot Partners LP were sued this week for investing in funds run by Bernard Madoff, was withdrawn by investors.

The request by the Calibre Fund, a Merkin investor, came after class-action lawsuits were filed by other investors against Merkin, chairman of auto lender GMAC LLC, and his funds. The investors claimed Merkin misled them by claiming he invested in a “diverse portfolio of securities.” Harry Susman, a lawyer for the Calibre Fund, said Merkin may be personally liable as the funds’ general partner.

Susman said today his client withdrew the freeze request after U.S. District Judge Richard Sullivan in New York said he was “not inclined” to grant it. The Calibre Fund, which invested $10 million with Ascot Partners, wanted Sullivan to freeze Merkin’s assets so investors might get a recovery if they win the suits over losses blamed on the alleged $50 billion fraud at Madoff’s investment-advisory firm.

“The judge’s comments at the hearing yesterday and the resulting withdrawal of the motion speak for themselves,” Gary Mennitt, a lawyer for Merkin, said in an e-mailed comment. “The motion was baseless.”

“Mr. Merkin and his family are personally among the largest victims of the massive fraud,” another Merkin lawyer, Andrew Levander, said Dec. 16 after the Ascot lawsuit. “Like the other victims and the entire financial community, Mr. Merkin is shocked by these events.”

Madoff’s Arrest

Madoff, 70, was arrested Dec. 11 after telling his two sons and federal investigators that he had been using money from new investors to pay off old ones in a Ponzi scheme. He said clients of New York-based Bernard L. Madoff Investment Securities LLC lost $50 billion.

Ascot Partners and Gabriel Capital invested with Madoff, according to court papers.

The case is Calibre Fund v. Merkin, 08-cv-11002, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David Glovin in U.S. District Court in New York at dglovin@bloomberg.net.

Last Updated: December 19, 2008 13:48 EST