March 26 (Bloomberg) -- The brother of convicted Ponzi scheme mastermind Bernard Madoff had his assets frozen by a New York state judge as part of a $2 million lawsuit filed by an investor who lost $470,000 in Madoff’s fraud.

New York Supreme Court Justice Stephen Bucaria yesterday signed an order temporarily freezing assets of Peter Madoff, who was chief compliance officer of Bernard L. Madoff Investment Securities LLC, according to a copy of the order. Bucaria will hold a hearing on April 3 in Nassau County.

Peter Madoff served as trustee for a $470,000 inheritance that 22-year-old law student Andrew Samuels received in 2003, his father, Howard Samuels, said in an interview. The judge issued the order in a lawsuit filed yesterday by the younger Samuels, who is suing Peter Madoff for $2 million for breaching his fiduciary duty by investing his inheritance with Bernard Madoff.

“All of his assets” are frozen, Howard Samuels said. “Everything.”

The order prohibits Peter Madoff, who lives in Old Westbury, New York, on Long Island, from removing, transferring or encumbering any funds or property and requires him to disclose all assets he owns. Andrew Samuels’ lawyer, Steven Schlesinger, said the freeze order reaches all of Madoff’s assets.

Compliance

Madoff’s lawyer, John “Rusty” Wing, didn’t immediately return a call seeking comment. Peter Madoff was among the thousands who lost money when Bernard Madoff’s scheme collapsed, according to an investor list previously filed in court. Peter Madoff hasn’t been accused of wrongdoing. His daughter, Shana Madoff, also worked in compliance at Madoff Securities.

Bernard Madoff pleaded guilty March 12 to defrauding investors by using money from new ones to pay off old ones in a Ponzi scheme. Before his Dec. 11 arrest, Madoff had told his thousands of clients that they had about $65 billion, prosecutors said. Madoff is in jail awaiting sentencing on 11 counts. He faces as much as 150 years in prison.

Howard Samuels said his father-in-law, Martin Joel, worked for Madoff and in 1997 created a trust for Andrew Samuels. Joel died in 2003 and Peter Madoff became trustee of the trust, Howard Samuels said. Peter Madoff invested with his brother Bernard.

“As a trustee, he’s got a fiduciary duty to make sure the money he was investing for his client was safe,” said Howard Samuels, who works as an attorney in Central Islip, New York. “He should be punished for what he did.”

Bond

Andrew Samuels’ lawsuit seeks $470,000 in compensatory damages and $1.5 million in punitive damages.

“This is only the beginning,” David Kettel, a lawyer at Venable in Los Angeles, said in an e-mail. “The freeze order does not necessarily mean the assets will be forfeited.”

Peter Madoff was among those to whom Bernard Madoff confessed shortly before his arrest, according to Ira Sorkin, the lawyer for Bernard Madoff. Peter Madoff also co-signed Bernard Madoff’s $10 million bond following the money manager’s arrest. In mid-December, Massachusetts regulators subpoenaed documents from Peter Madoff.

The case is Ross v. Madoff, 09-5534, New York State Supreme Court for Nassau County (Mineola)

To contact the reporter on this story: David Glovin in federal court in Manhattan at dglovin@bloomberg.net.

Last Updated: March 26, 2009 00:08 EDT