By Jonathan Stempel
NEW YORK (Reuters) - The trustee seeking money for victims of Bernard Madoff's fraud won court permission on Tuesday to file a $975.5 million lawsuit against two feeder funds he said contributed to the Ponzi scheme.
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U.S. Bankruptcy Judge Burton Lifland in Manhattan authorized the trustee Irving Picard to file the lawsuit against the Kingate Global Fund, the Kingate Euro Fund and more than one dozen other defendants.
In his complaint, Picard alleged that two London men, Federico Ceretti and Carlo Grosso, were the "masterminds" behind a scheme from 1994 to 2008 to funnel $1.7 billion to Madoff from their Kingate funds, which invested all their money in Bernard L. Madoff Investment Securities LLC.
"Ceretti and Grosso had close and long-lasting business and personal relationships with Madoff," and ignored "countless red flags" of fraud as they collected "hundreds of millions of dollars in fees" from Kingate investors, Picard wrote in a 129-page complaint.
The $975.5 million represents sums that Ceretti, Grosso and the Kingate funds redeemed from Madoff, and must be returned, Picard said.
Picard had originally sued the funds in April 2009 to recover $255 million, court records show. The amended complaint adds new defendants and alleged grounds for recovery.
The firm Zolfo Cooper was named in 2009 to liquidate the Kingate funds, which are based in the British Virgin Islands. No one at that firm was immediately available to comment.
A London-based lawyer for FIM Advisers LLP, a firm run by Ceretti and Grosso, did not immediately return a call after business hours seeking comment.
Picard has filed roughly 1,050 lawsuits on behalf of former Madoff investors to recover about $90 billion.
He has recovered roughly $7.6 billion, but said most of that sum is tied up in litigation, including by other Madoff customers.
The case is Picard v. Ceretti et al, U.S. Bankruptcy Court, Southern District of New York, No. 09-ap-01161.
(Reporting by Jonathan Stempel in New York; editing by Carol Bishopric)