Thousands of investors who lost money in Bernard Madoff's scheme and have been unable to recover their losses can dip into a $2.3 billion pot of cash, most from the estate of a philanthropist closely tied to the convicted swindler, federal officials said Monday.

Under rules announced in Manhattan by  U.S. Attorney Preet Bharara, an estimated 10,000 so-called "indirect" investors will have until Feb. 28, 2014, to file claims to recover net losses they sustained through feeder funds.

A large chunk of the cash comes from a 2010 settlement with the estate of philanthropist Jeffry Picower, a Madoff friend and investor who died in 2009. The feeder funds took billions in cash from investors and put the money into Madoff's operation.

Because the individual investors didn't deal directly with Madoff, only the feeder funds were able to make claims in bankruptcy court and file for recovery with trustee Irving Picard. The trustee has spent the past five years searching for customer assets. So far he has recovered $9.5 billion.

Working under the rules of the federal Securities Investor Protection Act, Picard denied the thousands of indirect investors the ability to file claims as direct customers of Madoff. The new plan lets indirect investors file claims with a special government master, Richard Breeden, to get recovery. Rules for filing claims are spelled out at

"We are hoping as many of those as possible send in forms," Breeden said.

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Only those who can show a net loss of their principle investment -- Picard's rule -- can seek to recover, said Breeden, former chairman of the Securities and Exchange Commission. So-called "net winners" who got back more than they put into Madoff can't file claims, he noted. Madoff's family members are also ineligible, he said.

"It is a happy day, we feel very excited to open up the process," said Breeden, who is being paid by the government. Picard, who so far has distributed about $4.8 billion to investors with approved claims, is being paid through the nonprofit Securities Investor Protection Corp.

In a statement, Amanda Remus, a spokeswoman for Picard, said the trustee lauded the announcement as an important development in the Madoff recovery effort.

"Every distribution is critical and we wish Mr. Breeden and his team much success in the process that is now underway," Remus said.

Breeden said it was unclear what percentage of losses would be reimbursed. Other experts in the case said it was also unclear how settlements Picard made with various feeder funds would impact what Breeden does.

Recovery of funds in Madoff's scheme

Customer losses: $17.3 billion

Funds recovered by trustee: $9.508 billion

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Funds disbursed by trustee: $4.883 billion

Funds disbursed by federal government: $0 to date

Source: Website of Bernard Madoff Trustee, Manhattan U.S. attorney's office