Investors who have lost their money in what is alleged to be the world’s biggest financial fraud may also be made to repay any profits that they made to US liquidators. Under a new bankruptcy ruling, any investors who withdrew cash from the hedge fund run by Bernard Madoff before the $50 billion (£34 billion) fraud was discovered could be forced to return their original investment and any profits.

The ruling, which was made in October, will come as a devastating development to Walter Noel, 78, the billionaire whose own investment firm — Fairfield Greenwich — lost $7.3 billion in Mr Madoff’s scheme.

As the victims began a batch of lawsuits against him, one financier who had invested his own clients’ money with Mr Madoff committed suicide yesterday. Thierry de la Villehuchet, 65, the co-founder of Access International Advisors, a fund management company, killed himself in his Madison Avenue office after losing as much as $1.4 billion.

As the FBI and the Securities and Exchange Commission began to construct the world’s biggest fraud case against Mr Madoff, a second class-action lawsuit was filed against Mr Noel and Fairfield Greenwich.

The plaintiffs accuse Mr Noel of failing to vet Mr Madoff adequately. The Fairfield Greenwich founder had invested $7.3 billion of his own, his family and investors’ money. Mr Noel’s role as a financier who introduced new clients to Mr Madoff — through “feeder funds” such as Fairfield — is also under scrutiny by federal investigators.

While the financial cost to Mr Noel is already public, the personal cost to the Manhattan socialite and his wife, Monica, has yet to emerge.

The couple and their five daughters were well known on the New York and Connecticut party circuits, regularly hosting social events at their Park Avenue apartment in the Upper East Side of New York and at their home in Greenwich, Connecticut. It was through these parties that Mr Noel and four of his sons-in-law, who worked for the family firm, were able to attract new investors drawn from America’s financial elite.

According to David Patrick Columbia, of New York Social Diary, the website chronicling the city’s monied social scene, Mr Noel and his wife had made a concerted effort over the past five years to be part of the wealthy New York set.

He said: “He is a kind of Jimmy Stewart figure with a craggy face and has five beautiful daughters. They were very attractive, very rich and very successful — that gets you into that set.”

Speaking to The Times on Monday evening, Monica Noel seemed unruffled by the scandal. Believing that she had been connected to another party, she chatted about arrangements for a wedding reception in Mexico.

The family divide their time between the flat in New York — 11 blocks from where Mr Madoff is under 24-hour house arrest — the house in Connecticut and a villa in Florida. It is also believed that the Noels have a home on the Caribbean island of Mustique.

Two weeks ago Mr Madoff shocked the world’s financial community when he allegedly confessed to his two sons — Mark and Andrew, who worked for him — that his business was “basically, a giant Ponzi [pyramid] scheme” and that “it’s all just one big lie”. He also told his sons he believed that he had defrauded about $50 billion from his investors.

Mr Madoff is said to have told his sons that he would disburse the remaining $300 million in his business to staff, family and friends and then turn himself in, but they informed the FBI before he had chance to do so.

Mr Madoff is charged with one count of fraud and, having failed to secure a remaining $3 million to meet bail conditions, has been electronically tagged. His wife, Ruth, has been ordered by a New York court to hire and pay for security guards to protect her husband from irate investors and to prevent him from fleeing.

Lawyers are preparing class actions on behalf of investors against Mr Madoff, his business, and the feeder funds that supplied him with fresh capital.

They are expected to use a precedent set by a landmark case seeking the return of cash from the Bayou Hedge Fund Group, which defrauded investors of an estimated $450 million.

A US judge said that investors who withdrew money they had made from Bayou before it collapsed must return the cash so that it could be shared among those who had lost money. The only way this could be avoided was if investors could prove that they withdrew the money “in good faith”.

Carole Neville, a partner at Sonnenschein representing investors in the Bayou case, said of Mr Noel: “He lived high on the hog and was very visible so I’d expect people to go for him. Anything they’ve redeemed from the Madoff fund is vulnerable for clawback.”

Some investors are appealing against the Bayou ruling.

Noel’s road to riches

— Founder of Fairfield Greenwich, a hedge fund based in New York but run out of Connecticut

— Fairfield Greenwich has lost $7.3 billion in the fraud, slightly more than half of its funds

— In 2007 Fairfield Greenwich made $160 million from its relationship with the Madoff fund

— Mr Noel owns at least three homes in the US – a flat on Park Avenue in the Upper East Side area of Manhattan, a home in Greenwich, Connecticut, and a villa in Palm Beach, Florida

— He is believed to have known Bernard Madoff for 19 years and regularly introduced his clients to Mr Madoff’s investment business

— A graduate of Harvard Law School, he is married to a wealthy Brazilian socialite called Monica. They have five daughters

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