NEW YORK, Aug 26 (Reuters) - The trustee seeking money for victims of Bernard Madoff has reached a $98 million settlement with Maxam Absolute Return Fund, which fed cash into the imprisoned swindler's Ponzi scheme.
The accord, disclosed in court papers filed in U.S. Bankruptcy Court in Manhattan on Monday, followed a series of other settlements with so-called feeder funds reached by the trustee, Irving Picard.
The settlement with Maxam returns $97.8 million that the fund had withdrawn from Madoff's firm, according to court papers. Maxam in exchange will now have an allowed claim of nearly $276.7 million in the recovery proceedings.
Amanda Remus, a spokeswoman for Picard, said the accord, if approved by a judge, would provide money for the "eventual distribution to defrauded Madoff customers with allowed claims."
The settlement resolves a lawsuit Picard filed in 2010, claiming Maxam knew or should have known it was profiting from a fraud.
Maxam and its executives "all buried their heads as they profited richly from Madoff's fraud and focused on their own personal gain," the lawsuit said.
By the time the Ponzi scheme fell apart in December 2008, Maxam had invested over $300 million in investor funds with Madoff, the lawsuit said.
Maxam had been founded by Sandra Manzke, a former CEO of Tremont Capital Management Inc, which had also funneled investor money into Bernard L. Madoff Investment Securities LLC.
In 2011, Picard reached a $1.025 billion settlement with Tremont, one of the largest Madoff feeder funds.
To date, Picard, a partner at Baker & Hostetler, has recovered or reached settlements of $9.35 billion. Total allowed claims by investors to date are $11.1 billion, according to the trustee's website.
A lawyer for Maxam did not respond to a request for comment.
Madoff pleaded guilty to running the Ponzi scheme in March 2009. He is serving a 150-year sentence in a North Carolina federal prison.
The case is Picard v. Maxam Absolute Return Fund LP et al., U.S. Bankruptcy Court, Southern District of New York, No. 10-ap-05342.