The palatial Old Westbury home of Peter Madoff, who pleaded guilty more than two years ago to charges related to his brother Bernard's giant Wall Street swindle, sold for $3.5 million and the cash will be used to help pay off investors, federal officials said Wednesday.

Peter Madoff's five bedroom and seven bath home at 34 Pheasant Run was originally reported to have been listed for $4.495 million when he pleaded guilty to charges in the case and agreed to forfeit his property.

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The home has a tennis court and in-ground pool, as well as a separate outside building that now contains a small apartment, said a spokesman for the U.S. Marshals Service, the agency that handled the sale.

Peter Madoff, 69, pleaded guilty in 2012 on charges that as compliance officer for his brother's investment business he falsified documents and lied to regulators. He was sentenced to 10 years in prison.

Bernard Madoff pleaded guilty in March 2009 after admitting he swindled thousands of investors out of at least $17.6 billion in the largest Ponzi scheme on record. Madoff, 76, is currently serving a 150-year federal prison sentence in North Carolina.

The Pheasant Run property's selling price is relatively small compared with losses suffered by the Madoff victims. The money from the house sale will go into a special $2 billion federal fund being administered by a special master. Separately, trustee Irving Picard has recovered over $10 billion for customers and has paid out nearly $7.3 billion.