Bernard Madoff, the Wall Street fraudster, has been forced to trade his life of luxury for a lower bunk bed in a prison cell where he has the company of a drug dealer and a spy.

The first details of the former financial wizard’s life behind bars emerged in court papers filed by a California lawyer named Joseph Cotchett who interviewed him in the Butner Correctional Complex in North Carolina for four hours in July.

“Rather than spending time on private planes or his yachts, or residing in his luxury apartment in Manhattan, his Montauk, Long Island, and Palm Beach mansions, or his property in Cap d’Antibes, France, Madoff now shares a cell with a 21-year-old inmate convicted of drug crimes,” the lawsuit says.

“Madoff sleeps in the lower bunk and he eats pizza cooked by an inmate convicted of child molestation. His recreation consists of walking around the prison track at night.”

Madoff, 71, was sentenced to 150 years in prison in June for masterminding a $65 billion (£39 billion) pyramid scheme that robbed thousands of their life savings, including Elie Wiesel, the Nobel peace laureate and Holocaust survivor.

The record-setting swindler has been incarcerated in the medium-security facility at Butner since July 14. The Bureau of Prisons has denied a report that he is suffering from cancer.

According to the lawsuit in New York State Supreme Court, Madoff has sorted through his motley fellow-inmates and befriended a notorious Mob boss and an infamous Israeli spy.

“He now spends time with former Colombo crime family boss Carmine Persico and Jonathan Pollard, who was convicted of spying for Israel. Most of his fellow inmates are in prison for drug or sex crimes,” the suit says.

The suit, filed by Mr Cotchett on behalf of a dozen victims of Madoff’s fraud, claims that Madoff’s office was once rife with drug use and “sexual deviance”.

“Starting in 1975 Madoff began sending a longtime employee and office messenger to obtain drugs for himself and the company,” the lawsuit charges.

Drug use in the office was described as rampant and the office was likened to the “North Pole” in reference to the cocaine use.

“Eventually the main employee supplier was fired for his drug abuse when cocaine and other undisclosed drugs were found in his desk in 2003. Madoff worried that it might bring in drug prosecutors who might uncover the big scam.”

The suit says that Madoff hosted “wild office parties sans spouses” with “topless entertainers wearing only G-string underwear serving as waitresses”.

“The employees had late-night affairs in exciting places — such as their boss’s sofa ‘with whomever they could find’,” the complaint alleges.

The suit claims that some of Madoff’s “special investors” knew that his employees were supplying drugs to the office and says that some of his feeders — advisors who channelled funds to his firm — took part in the sexual shenanigans.

The suit says that at least $250 million was laundered through Madoff Securities International Ltd, the London arm of his operation.

While Madoff languishes in jail, US marshals seeking to recover victims’ lost assets have sold his beach house in Montauk, Long Island, to an unidentified buyer for $9.41 million — about $650,000 over the asking price.

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