Hunt for Madoff money to drag on for years

By Martha Graybow - Analysis

NEW YORK (Reuters) - Five months after Bernard Madoff's massive fraud was revealed, little of his victims' money has been found and it appears increasingly likely that the worldwide hunt for their missing billions will drag on for years.

So far, the court-appointed trustee sorting through Wall Street's biggest investment fraud has located only about $1 billion to be distributed to defrauded customers -- a fraction of the $65 billion the confessed con man's records purported to have in nearly 7,000 client accounts when the FBI arrested him in December.

Trustee Irving Picard has signaled, however, that he is ramping up efforts to find more money, a ray of hope for victims if these funds can ever be tracked down and shared among them.

At this relatively early stage of Picard's investigation, though, it is unclear if that is possible.

Legal wrangling could take years, especially the complicated court battles in U.S. Bankruptcy Court over whether some investors who withdrew money should be forced to compensate others, said Earl Colson, an attorney at law firm Arent Fox LLP in Washington.

He said that not only is Picard examining the dollar amounts that investors deposited or withdrew over decades in making determinations about who should be forced to give back money, the trustee is also developing legal cases on whether some investors were or should have been aware of the fraud.

"It's not a question of how much you put in or took out, it becomes a question of motive," Colson said.

In recent weeks, Picard has sued a number of hedge funds and other big investors, demanding they return $10.1 billion in "fictitious profits" they received from Madoff, who confessed in court in March that he had not done any trading in client accounts in years.