June 8 (Bloomberg) -- A group of investors fleeced in Bernard Madoff’s $65 billion Ponzi scheme are asking a bankruptcy court to give them the money they would have earned if they had been invested in the stocks Madoff said they were.

A suit, filed Friday in U.S. Bankruptcy Court in New York, claims the court-appointed trustee Irving Picard has incorrectly calculated the money due to Madoff’s victims as the amount of their principal invested minus any withdrawals.

The investors, led by 73-year-old New Jersey widow Mary Albanese, claim federal law requires Picard to ensure they are paid the amounts reflected in their account statements, minus any charges owed to Madoff. If successful, the claim would increase the victims’ claims against the Securities Investors Protection Corp., the agency liquidating Madoff’s firm.

“Using the trustee’s cash in/cash out approach will result in each plaintiff either receiving no SIPC funds at all, or receiving far less than what is on their final Madoff statements - even though the statements showed positions in real securities at verifiable prices, which plaintiffs relied on and reasonably believed were truthful.”

Class of 3,000

The plaintiffs, who claim they are owed $9 million, seek to represent a class of more than 3,000 Madoff investors who would get less money under Picard’s calculation. The suit seeks a court declaration that the victims are due the full value of the stocks falsely reflected in their November 2008 account. Madoff was arrested the following month.

The plaintiffs are retired or elderly Madoff victims, with few sources of income other than Social Security, who are “struggling to pay basing living expenses,” according to the complaint. They dispute the definition that the trustee, Irving Picard, is using to define “net equity” for purposes of their claims.

The Securities Investor Protection Act “is intended to protect a customer’s legitimate expectations of what the broker held in his account - even if the broker never purchased any securities in the first place,” they said in the complaint.

Madoff, 71, pleaded guilty in March to running what has been called history’s biggest Ponzi scheme. He faces as many as 150 years in prison when he is sentenced.

Picard, a lawyer with Baker & Hostetler LLP in New York, has said that purported trades on years’ worth of Madoff customer statements were never executed. Kevin McCue, a Picard spokesman, didn’t immediately respond to voicemail and e-mail messages seeking comment.

Picard has set up a process to speed payments of up to $500,000 each to eligible investors who can’t pay medical bills, buy food or care for dependants. It also covers people 65 years and older who were forced to come out of retirement after losing money to Madoff.

The case is In re. Bernard L. Madoff, 09-11893, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

Last Updated: June 8, 2009 12:17 EDT