Bermuda-based Kingate Management Ltd. has been given an extension until next Monday to respond to a lawsuit in which it is accused of withdrawing $255 million in "fake profit" from funds invested with fraudster Bernard Madoff.

The extension, requested by Madoff trustee Irving Picard, who is suing Kingate, was granted by US bankruptcy Judge Burton Lifland in New York this week.

Mr. Picard, who is in charge of winding up Madoff's interests and is trying to retrive as much as he can for swindled investors, revealed in a court filing that he is in "continue ongoing settlement discussions" with Kingate, as well as three hedge funds run by Fairfield Greenwich.

The trustee sued Kingate's British Virgin Islands-registered Kingate Global Fund and Kingate Euro Fund in April, accusing the Madoff "feeder funds" of withdrawing $255 million from Madoff's firm within the 90 days before his arrest on December 11 last year. The Kingate funds allegedly invested a total of $1.73 billion with New York-based Bernard L. Madoff Investment Securities LLC.

Madoff was sentenced to 150 years imprisonment for a string of offences relating to a huge "Ponzi scheme", in which victims were told they had $65 billion invested, when most of it was fictitious.

Judge Lifland gave Fairfield Greenwich an extension until September 21 to repsond in its case. Three hedge funds operated by the company, which has operations in Bermuda, are accused of taking $3.54 billion in "fake profit" from Madoff's company.

Mr. Picard sued Fairfield Sentry, Greenwich Sentry and Greenwich Sentry Partners in May over claims they received "unrealistically high" returns on their investments. He claims Fairfield's withdrawals over a six-year period are recoverable under US bankruptcy law.

The trustee is seeking a total of $14.5 billion in damages in about a dozen "clawback" lawsuits accusing Madoff's biggest investors, including offshore hedge funds and wealthy US philanthropists, of profiting for years from the fraud. Such lawsuits can seek the return of withdrawals as far back as six years, based on allegations that defendants knew about Madoff's fraud, or at least should have known.

Mr. Picard's efforts to win out-of-court settlements got a boost in May when Banco Santander SA, Spain's biggest bank, agreed to pay $235 million to settle claims that two of its hedge funds profited by directing billions of dollars to Madoff for more than 10 years.