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Peter B. Madoff, the younger brother and business partner of convicted felon Bernard Madoff, is under increasing scrutiny from investigators, as well as victims of the $65 billion investor fraud.

The latest indication of the younger Madoff’s possible exposure comes from the report of one investor, who said that he withdrew a small sum entrusted to Bernard Madoff in July 1985, and received a $10,000 check drawn on the older Madoff’s bank account – but signed by Peter Madoff.

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The investor provided a copy of the check to the New York Times, but asked not to be identified to guard his family’s privacy. The investor said that others in his family had also received checks with Peter Madoff’s signature in the mid-1980s, although later checks were signed only by Bernard Madoff.

The timing could prove crucial. In his guilty plea, Bernard Madoff stated that he had begun the fraud in the early 1990s “to the best of my recollection.” Authorities, however, date the scheme to the early 1980s, although they have not publicly revealed any evidence.

John R. Wing, a lawyer for Peter Madoff, 63, has said his client, who was the firm’s senior managing partner and chief compliance officer, had no knowledge of the fraud and has not been charged with any wrongdoing.

But yesterday, a New York State Supreme Court Justice Stephen A. Bucaria, sitting in Nassau County, imposed a temporary asset freeze on Peter Madoff’s accounts at the request of a law student from Dix Hills, NY. The law student, Andrew Ross Samuels, had been the beneficiary of a college trust fund, which was entirely lost to Madoff’s Ponzi scheme.

The freeze prohibits Peter Madoff from moving money from any bank, brokerage firm or other financial institution or from selling or borrowing against his physical assets. It also requires him to disclose the location of any assets he has “secreted” so far, and directs any financial institution to take “reasonable precautions” to ensure that he complies with the order.

Steven R. Schlesinger, a lawyer for Samuels, said that his client was the beneficiary of a $478,000 fund set up in 1997 by Samuel’s grandfather, Martin J. Joel Jr. and Peter Madoff as the trustees.

When Joel died in 2003, Peter Madoff became the sole trustee, and the entire fund was invested with Bernard L. Madoff Investment Securities, according to Schlesinger.

Besides investing the trust fund in what turned out to be a Ponzi scheme, Peter Madoff also did not notify Samuels that he could have terminated the trust in 2007, when he turned 21, the complaint says.

The lawsuit is at least the second brought against Peter Madoff since his brother’s arrest.

Last month, two children of N.J. Senator Frank Lautenberg filed an action against the younger Madoff, saying that as the firm’s senior managing partner and chief compliance officer, he either failed to spot “obvious, material red flags” of fraud, or covered them up.

The Lautenbergs, who had invested a family philanthropy as well as individual savings with Madoff’s firm, say they lost $7 million as a result of the scheme.

Peter Madoff joined his brother’s firm in 1970 after completing law school, and together they helped pioneer the computer-driven trading methods that culminated in the development of the electronic trading network known as the Nasdaq market.

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• Ruth Madoff withdrew $15M before husband’s arrest – February 11, 2009
• Madoff ordered to jail after pleading guilty – March 12, 2009
• Madoff to face his victims in court Thursday – March 8, 2009
• Prosecutor: Madoff sent emeralds and diamonds to relatives, friends – January 7, 2009
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