UPDATE 2-Madoff victims get $534.3 mln, losses top $21 bln

* $4.44 billion allowed claims, but advances smaller

* Estimated cash losses rise to $21.2 billion

* Trustee Irving Picard plans more lawsuits

* Picard plans to pursue case against deceased Picower (Recasts, adds details from conference call)

By Jonathan Stempel

NEW YORK, Oct 28 (Reuters) - Victims of Bernard Madoff's epic fraud have gotten approval to receive $534.25 million of payments, the trustee trying to recover the imprisoned swindler's assets said.

The sum is less than one-eighth of the $4.44 billion of claims that court-appointed trustee Irving Picard has so far deemed valid. Picard spoke to reporters on a conference call.

The sum is also less than 3 percent of the $21.2 billion of losses suffered by holders of 2,335 Madoff accounts. These losses are up from the $13 billion the government estimated in June, when Madoff was sentenced to 150 years in prison.

The slow pace of the payouts, nearly a year after the scandal broke, shows the challenges facing Picard as he supervises the liquidation of Bernard L. Madoff Investment Securities LLC, home to a Ponzi scheme estimated at $65 billion.

Picard, a partner at the law firm Baker & Hostetler LLP, said he has reviewed 2,861 direct customer claims, allowing 1,558 and rejecting 1,303. He said 15,974 customer claims were submitted. Claim data will likely change, he said.

The trustee said he has recovered $1.4 billion of Madoff assets, an amount that should reach $1.5 billion by year end.

He has also filed lawsuits to recover $15 billion from Madoff investors he calls "net winners." Of the 4,903 accounts at Madoff's firm on Dec. 11, 2008, when Madoff was arrested, 2,568 received more money than they deposited, he said.

Picard said "there definitely will be further lawsuits," especially over the next nine months, with proceeds being shared by victims with allowed claims. However, he said, "We're not going to be suing people who don't have money."

The Securities Investor Protection Corp, a federally chartered agency that supervises the liquidation of brokerages, has been "the only source of distributed funds" to victims so far, the agency's president Stephen Harbeck said on the call.

Harbeck said the $534.25 million of committed advances is more than in the SIPC's 321 combined prior liquidations since 1970. Federal law limits SIPC protection to $500,000.

For a Madoff fraud factbox, please click [ID:nN02335510]

PICOWER RECOVERY TARGETED

Picard also said he will pursue the recovery of $7.2 billion from the estate of billionaire philanthropist Jeffry Picower, who drowned Sunday in a swimming pool at his Palm Beach, Florida, home following a heart attack.

The trustee had accused Picower of pulling the money from Madoff's firm directly or through entities he controlled.

"His death is certainly tragic," Picard said. "Having said that, we will continue with the litigation."

On Oct. 2, Picard sued a brother, two sons and a niece of Madoff to recover $198.7 million he said was misappropriated while they were executives at the Madoff brokerage.

A federal bankruptcy judge is expected in February to consider the validity of Picard's methods in deciding which Madoff clients' undeserved money should be clawed back.

Picard said he has reviewed client account histories dating to 1983 and is "making some progress" in going back further, perhaps to the 1970s, by reviewing microfilm and microfiche.

It is not clear when Madoff's Ponzi scheme began.

Madoff is serving his sentence at a medium-security federal prison in Butner, North Carolina.

The case is Securities Investor Protection Corp v. Bernard L. Madoff Investment Securities LLC, U.S. Bankruptcy Court, Southern District of New York, No. 08-1789. (Reporting by Jonathan Stempel; Additional reporting by Grant McCool; Editing by Tim Dobbyn, Gary Hill)