Walter Noel, the hedge fund manager who basically funneled his clients' money straight to Bernie Madoff, is on the hook for $3.2 billion in funny money his firm withdrew from Madoff before the fraud unraveled.

The trustee overseeing the settlement of all the Madoff accounts, who is tasked with returning as much of what's left to ruined investors, sued Noel's firm the Fairfield Greenwich Group yesterday for all the money it had withdrawn from Madoff in the last six years, claiming Noel and his investment partners should have known that Madoff was a fraud. According to the suit, Fairfield Greenwich redeemed $1.2 billion from Madoff in the three months before the scheme came undone.

How could Noel have known? Well, if he had looked at those artfully faked statements of fictitious trades that Madoff sent out each month, he would have noticed that some trades were recorded at prices that were outside the trading range on the day they were allegedly traded. Or that some were recorded on weekends and holidays. Madoff got a little sloppy now and again.

Fairfield Greenwich repeatedly told its clients that it would aggressively monitor Madoff's performance in order to protect their investments. It didn't. But it did make about $500 million in fees off of Madoff since 2003, so it all evens out.

The trustee's suit comes on top of a bevy of investor lawsuits against Fairfield Greenwich for turning a blind eye. The Noels, once the very model of Greenwich social supremacy, are now completely and totally fucked.

[Photo: NY Mag.]