By Andrew Scurria

The U.S. Supreme Court extended the global hunt for tainted cash from Bernard Madoff's Ponzi scheme, refusing to shield European banks and other foreign investors from having to return roughly $3 billion they collected before his 2008 arrest.

The justices declined to stop lawsuits against foreign institutions including HSBC Holdings PLC, Crédit Agricole SA and Société Générale SA over money stolen from Mr. Madoff's victims that was transferred overseas.

The court order paves the way for years of additional litigation against these foreign firms, some of the last -- and largest -- targets in an international legal campaign to dig up money for Mr. Madoff's victims.

Irving Picard, the liquidating trustee who has spent more than a decade recovering the loot, has been trying to reclaim money that was distributed from offshore investment funds in the British Virgin Islands, Cayman Islands and Bermuda.

These feeder funds pooled investors' cash, parked most or all of it with Mr. Madoff and collected proceeds from the Ponzi scheme before its collapse. Mr. Picard has long insisted that he can follow the cash trail to the feeder funds' overseas investors and redistribute the money among those who lost money in the Ponzi scheme.

Under Monday's order, Mr. Picard can go ahead with these lawsuits, which have been largely put on hold during the appeals process.

In a statement, the trustee said that while the feeder funds are largely insolvent, he will continue his claims against their underlying investors, with all proceeds going to customers of Mr. Madoff's phantom investment firm.

A New York appeals court last year brought the foreign transfers within Mr. Picard's grasp, ruling that to declare them off-limits would disadvantage legitimate creditors and encourage fraudsters to stash stolen assets overseas. The Justice Department backed up that ruling in April, arguing that even funds that passed between foreign institutions can be unwound under U.S. bankruptcy law.

Mr. Madoff is serving a 150-year prison sentence in North Carolina after pleading guilty to running the largest Ponzi scheme in history.

Write to Andrew Scurria at Andrew.Scurria@wsj.com

(END) Dow Jones Newswires

June 01, 2020 11:50 ET (15:50 GMT)

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