UPDATE 1-Madoff investors sue U.S. agency SIPC over claims

* Lawsuit alleges fraud by SIPC head, directors

* Dispute over method of calculating customer claims

(Adds SIPC statement)

By Grant McCool

NEW YORK, Feb 24 (Reuters) - Some of Bernard Madoff's former customers opened a new legal front on Wednesday to get their money back, accusing the agency overseeing the distribution of assets left from the epic swindle of fraud.

In a lawsuit seeking class-action status and filed with the U.S. District Court in New Jersey, three investors accused the head of the Securities Investor Protection Corporation, Stephen Harbeck, as well as SIPC directors, of failing to meet their obligations to properly insure investors.

SIPC is working with Irving Picard, a court-appointed trustee, on the liquidation of Madoff's former brokerage firm, Bernard L. Madoff Investment Securities LLC.

A federal bankruptcy judge in Manhattan has yet to rule on Picard's method of calculating customer claims, after hearing arguments on Feb. 2 [ID: nN02109594].

"At a time when the United States is in an economic crisis due, in large part, to the unremitting greed of SIPC's members, the SEC-regulated broker/dealers ..., SIPC is taking a position which is fraudulent as to the customers," the lawsuit said.

It called the SIPC's position "destructive" of Congress' intent to create the agency in the first place, "to instill investor confidence in the capital markets."

Harbeck said in a statement lawyers were incorrectly directing their frustration at SIPC.

"Sadly, this frivolous litigation will have the effect of making it harder for SIPC to focus all of its time and attention on aiding the Madoff victims," he said.

He said SIPC "is not now and never was a FDIC (Federal Deposit Insurance Corp)-like 'insurance' entity."

SIPC is a nonprofit agency created by Congress in 1970 to maintain a fund to help investors with accounts at failed brokerage firms. The agency can pay a single investor a maximum of $500,000.

Madoff, 71, is serving a 150-year prison sentence for orchestrating a decades-long fraud of as much as $65 billion. He pleaded guilty last March to running a Ponzi scheme, where early investors are paid with money from new clients. Thousands of investors lost their money.

Picard says investors' claims should be based on how much money they put into Madoff's scheme minus how much they took out over the years.

Many Madoff victims say they are entitled to more. Some propose valuing their stakes based on amounts reflected on their Nov. 30, 2008, account statements, known as "statutory balances."

Madoff was arrested in December 2008.

"In direct violation of their statutory obligations and for the first time in SIPC's history, defendants have taken the position that the customers' accounts were not insured for their statutory balances, but only for their net investment," the complaint said.

The case is Canavan et al v. Harbeck et al, U.S. District Court for the District of New Jersey, No. 10-954. (Reporting by Grant McCool; editing by Leslie Gevirtz and Andre Grenon)