Madoff trustee seeks $150 mln investor "clawback"

By Martha Graybow

NEW YORK, April 9 (Reuters) - The trustee liquidating Bernard Madoff's brokerage filed a lawsuit on Thursday seeking the return of $150 million that the firm transferred to an offshore investor in October, saying the money should be used to reimburse other customers of the jailed swindler.

The lawsuit signals that the trustee, Irving Picard, is ramping up efforts to use bankruptcy law to try to "claw back" funds withdrawn by some Madoff clients that he contends should be returned and used to help compensate other customers.

While Madoff was running his longstanding Ponzi scheme, the lawsuit says, certain investors of his money management business requested and received distributions that were nothing more than fictitious profits.

These bogus profits should be returned, Picard argues in the lawsuit.

The lawsuit was filed against Vizcaya Partners Ltd, described as an international business with a principal place of operation in the British Virgin Islands.

The company was a client of Madoff's investment advisory business, according to the lawsuit filed in U.S. Bankruptcy Court in Manhattan.

Also sued was Banque Jacob Safra Ltd of Gibraltar, which was the custodian for Vizcaya, according to the complaint.

"The purpose of this proceeding is to recover the preferential payment received by Vizcaya," the complaint says.

The lawsuit says Vizcaya, according to the Madoff firm's records, opened an account with the firm in December 2001.

Since January 2002, Safra or its affiliates invested about $327 million with the Madoff firm for Vizcaya's benefit. On about Oct. 31, 2008, the Madoff firm wired $150 million from its bank account to Safra, "apparently for the benefit of Vizcaya," the lawsuit said.

A phone number for Vizcaya could not immediately be located. A person who answered the phone at the head office of Banque Jacob Safra in Geneva said there was no one available to speak to a reporter because it was after hours.

Legal experts say that because Madoff has admitted his fraud was a Ponzi scheme, in which early investors are paid with money deposited by later ones, those who earned big profits on their Madoff portfolios could be subject to such clawback lawsuits.

Madoff has pleaded guilty to masterminding Wall Street's biggest-ever investment swindle, involving as much as $65 billion in client funds. He could be ordered to prison for the rest of his life when sentenced in June.

The trustee is seeking to recover assets linked to the confessed swindler's Bernard L. Madoff Investment Securities LLC to help reimburse bilked customers.

Picard is working with the U.S. Securities Investor Protection Corp (SIPC) to recover as much of Madoff's assets as possible to give to bilked customers. The trustee has said previously that he has located just more than $1 billion, a fraction of total investor losses.

SIPC, funded by brokerage firm dues, was established by Congress in 1970 to maintain a reserve for investors of failed brokerages. (Reporting by Martha Graybow; Editing by Brian Moss)