Several large investors, including hedge fund impresario Steve Cohen, have expressed interest in financing a controversial lawsuit filed by former AIG (AIG) chief Hank Greenberg over the legality of the 2008 bailout of the insurance giant, the FOX Business Network has learned.

Greenberg, once the largest AIG shareholder, filed a lawsuit in federal court charging that the federal government’s bailout of AIG amounted to an illegal “taking” of shareholder value. The bailout saved AIG from certain bankruptcy, but under the terms of the deal crafted by the Federal Reserve and the Treasury Department, shareholders like Greenberg were nearly wiped out.

Greenberg contends that the terms of the AIG bailout were more onerous than those given to other banks, and the government could have easily taken other steps to mitigate shareholder losses. He is seeking around $50 billion in damages.

The size of those damages—and the possibility that Greenberg could win the case—is what has a group of influential investors including Cohen interested in an unusual deal: providing funding to pay down legal costs of the case, in exchange for a “right” to collect a percentage of the damages if Greenberg prevails.

The funding of lawsuits is a growing part of the alternative investment business as litigation and its costs have exploded in recent years. What makes this effort unusual is that some of the top investors in the world would be betting against the U.S. government in its effort to win one of the most controversial pieces of litigation to arise out of the 2008 financial crisis.

Cohen was one of about a half dozen investors to attend a March 6 meeting at Greenberg’s New York office where the deal, and the progress of the case, first took center stage. Other investors included Chris Flowers, the head of the investment fund JC Flowers, Home Depot (HD) founder and financier Ken Langone, and prominent hedge fund manager Stan Druckenmiller, these people say.

During the meeting Greenberg’s high-profile attorney, David Boies, provided an upbeat assessment of Greenberg’s case, which has survived various dismissal attempts and is heading for a trial date possibly later in the summer.

Boies has taken depositions from the top government officials involved in the 2008 efforts by the federal government to bail out the financial system including former Treasury Secretary Hank Paulson, former Federal Reserve chairman Ben Bernanke and Tim Geithner, who at the time of the financial crisis served as the president of the New York Federal Reserve bank.

FOX Business has reviewed the depositions even as a federal judge has ordered that they remain sealed at the request of the government.

During the meeting, Boies said progress in the case has been good. He quipped at one point that he didn’t “want to pat himself too much on the back” for Greenberg’s court victories, according to people with knowledge of the matter. Those included the judge’s refusal to dismiss as well as the taking of testimony from top government officials including Bernanke’s in February.

Another indication that Greenberg’s case is finding some success in the court is that a federal judge in March ruled that the case could have class-action status.

These people say following Boies presentation the investors appeared eager to participate in the deal even if Greenberg has yet to decide if he will go forward with the funding plan. His legal costs are said to have surpassed $50 million and Greenberg intends to discuss specific terms of any deal individually with the investors, people close to the matter say.

Press officials for Greenberg, Cohen, Flowers, Langone and Druckenmiller declined to comment. A spokeswoman for Boies didn’t return calls for comment.

Earlier in the year, a federal appeals court dismissed a separate case filed by Greenberg against the New York Federal Reserve Bank on the grounds that “unusual and exigent circumstances” forced the bank to bail out AIG in the manner that it did.

But a separate case against the U.S. government over the $182 billion rescue of AIG remains and the government continues to argue that the depositions from the key officials involved in the bailout should remain under seal.

Those depositions, reviewed by FOX Business, show that Geithner, for instance, scrambled to bail out AIG after the bankruptcy of Lehman Brothers in September of 2008 because he didn’t fully grasp its importance to the financial system. AIG insured the toxic debt held on the balance sheets of the big banks, meaning that its insolvency would lead to massive losses across the financial system.

It is the haphazard way the bailouts were conducted that Greenberg contends led to the government to unfairly penalize AIG shareholders, The shareholders of other big firms that benefited from federal assistance, such as Goldman Sachs (GS), fared much better, Greenberg says in his lawsuit.

Still, the move to fund Greenberg’s efforts will undoubtedly raise eyebrows since he is challenging the legality of a taxpayer financed bailout of a company that is widely regarded as among the main culprits of the excessive risk taking that caused the 2008 financial collapse. 

In fact, at least one large investor wasn’t interested in Greenberg’s invitation to join the March 6 meeting: Billionaire businessman and conservative activist David Koch didn’t respond to a request for his attendance, people with knowledge of the matter say. A press official for Koch declined comment.

The eclectic mix of investors that Greenberg might be turning to is controversial as well; Cohen, for instance, faces civil charges that he failed to properly supervise employees who allegedly violated insider trading laws, and in a move first reported by FOX Business has hired Boies for his defense.

The billionaire money manager denies the charges, but his hedge fund SAC Capital was indicted by the Manhattan U.S. Attorney’s office and closed down as part of the government’s insider-trading crackdown. Cohen was not criminally charged in the matter but he no longer manages outside money and has renamed his “family office” that manages his own massive wealth Point72 Asset Management.

Charles Gasparino joined FOX Business Network (FBN) in February 2010 as Senior Correspondent.