Madoff clients targeted

The trustee liquidating Bernard Madoff’s defunct money management firm told 223 investors to return as much as $735 million or face legal action, a person familiar with the matter said.

“The trustee demands that you immediately return such amounts to the trustee for the benefit of all defrauded creditors” of Bernard L. Madoff Investment Securities, according to a copy of the letter.

Trustee Irving Picard mailed the so-called clawback letters to customers who redeemed investments over the last six years, the maximum period for which he can seek recovery under New York law, demanding 100% of the money paid out over that time, said Helen Chaitman, a Madoff investor and a lawyer with Phillips Nizer who is advising 350 victims.

The 223 letters went mostly to individuals and constitute the bulk of expected clawback letters, said the person familiar with the mailing. So-called feeder funds, which gathered money in their own names and sent it to Madoff, got similar letters earlier, the person said.

Picard’s right to demand cash back is being contested by some lawyers, who say state law isn’t applicable. Money that Madoff sent back to investors was a payment of debt, not a withdrawal, so the trustee can reverse only 90 days of such transactions, according to victims’ lawyer Jonathan Landers of Milberg.

Madoff, 70, pleaded guilty last month in Manhattan federal court to running the biggest Ponzi scheme ever, using $65 billion in real and artificial assets.