Madoff trustee is dealt fresh legal setback

NEW YORK (Reuters) - A Manhattan federal judge has limited the ability of the trustee seeking money for victims of Bernard Madoff's Ponzi scheme to recoup sums that may have been fraudulently transferred outside the United States.

In a decision on Sunday, U.S. District Judge Jed Rakoff said the trustee, Irving Picard, could not invoke federal bankruptcy law to recover money transferred outside the United States between foreign entities, citing a presumption that the law does not apply extraterritorially.

According to court records, the decision affects several dozen lawsuits brought by Picard, who is liquidating Bernard L. Madoff Investment Securities LLC.

Many involve transfers by non-U.S. "feeder funds" that typically funneled customer money to Madoff, but which in these cases withdrew money from his firm and sent it elsewhere.

A spokeswoman for the trustee had no immediate comment on Monday. Rakoff's chambers on Monday confirmed the authenticity of the decision, which was not available on the public docket.

Last week, the U.S. Supreme Court rejected a request by Picard to review the dismissal of his claims against banks he accused of enabling Madoff's fraud.

Picard has recovered about $9.82 billion for former Madoff customers who lost roughly $17.5 billion of principal.

The Ponzi scheme was uncovered in December 2008. Madoff, now 76, pleaded guilty in March 2009 and is serving a 150-year prison term.

The case is Securities Investor Protection Corp v. Bernard L. Madoff Investment Securities LLC, U.S. District Court, Southern District of New York, No. 12-mc-00115.

(Reporting by Jonathan Stempel in New York; Editing by Lisa Von Ahn)