Investors in two funds sued Bermuda-based Kingate Management Ltd. and its directors - including some Island residents - for $3.5 billion over investments in the defunct Bernard L. Madoff Investment Securities LLC.

The complaint was filed on Wednesday in Manhattan federal court by Criterium Capital Funds BV, BBF Trust and three other investors. The plaintiffs said Kingate made negligent misrepresentations to them and breached its duty.

Tremont Bermuda Ltd., owned by US group Tremont Advisors Inc., is also named as a defendant as is Bermuda-based Citi Hedge Fund Services Ltd., owned by Citigroup and formerly known as BISYS Hedge Fund Services.

"Defendants in fact did not properly vet or monitor Madoff and, instead, falsely reported steadily increasing account values to plaintiffs while paying themselves hundreds of millions of dollars in fees," the investors said in their complaint.

The lawsuit, filed by the law firm Boies Schiller & Flexner LLP, follows others against so-called Madoff feeder funds, including Fairfield Greenwich Group and Gabriel Capital LP. The plaintiffs seek class-action, or group, status to represent other investors in Kingate Global Fund Ltd. and Kingate Euro Fund Ltd.

Among the defendants are several directors of Kingate Management and one or both funds, who are described in the court documents as being Bermuda residents.

These include John Epps, a director of both Kingate funds, Christopher Wetherhill, a Briton who is a director of Kingate Management and both funds, and Shazieh Salahuddin, a director of Kingate Management.

Ms Salahuddin is also described as a "a senior employee" of FIM, an investment group that is based in London, and whose Bermuda offices on Front Street are located next door to Kingate's.

A call to Kingate's offices in Hamilton, Bermuda, wasn't immediately returned. The funds are registered in the British Virgin Islands.

In April, the trustee appointed to liquidate Madoff Securities sued Kingate in US Bankruptcy Court in New York for the return of $255 million transferred to the firm's funds in the months before Madoff's collapse. Boies Schiller lawyer Stuart Singer said in an interview that the plaintiffs in the investor lawsuit seek to review documents from Kingate as part of the pre-trial discovery process. Money manager Bernard Madoff, 71, pleaded guilty March 12 to defrauding investors by using money from new ones to pay off old ones. Madoff is also a defendant in the Kingate suit. Madoff is in jail and faces as many as 150 years in prison at his sentencing on June 29. Investors lost as much as $65 billion in the largest Ponzi scheme in US history.