The trustee overseeing the liquidation of Bernard Madoff's financial advisory firm has sued 43 new defendants affiliated with a hedge fund firm that fed money to the now-imprisoned swindler.

The trustee is seeking more than $3.6 billion of damages in the lawsuit.

Walter Noel, a co-founder of Fairfield Greenwich Group, was among those added to the year-old lawsuit by Irving Picard, the court-appointed trustee trying to recover money for victims of Madoff's estimated $65 billion Ponzi scheme.

In a 217-page amended complaint filed Tuesday night with the U.S. bankruptcy court in Manhattan, Picard sought to undo several billion dollars of transfers that Fairfield funneled to Bernard L. Madoff Investment Securities LLC.

The trustee is also trying to recover many hundreds of millions of dollars in stolen customer property that he said the Fairfield defendants received from Madoff in return.

Every dollar the defendants purportedly 'earned,' and every dollar they kept to unjustly enrich themselves, was stolen money, Picard's lawyers wrote in the amended complaint.

The defendants did not properly, independently, and reasonably perform due diligence into the many red flags strongly indicating Madoff was a fraud, the complaint added. The defendants did exactly the opposite ... They deepened the pain of Madoff's customers and their own investors.

Picard's lawsuit amends a complaint he filed in May 2009 against three Fairfield defendants. The new defendants include 24 other affiliates and 19 people, including Noel and Fairfield co-founders Jeffrey Tucker and Andres Piedrahita.

The three Fairfield co-founders received a combined $390 million of partnership distributions from 2002 to 2008, while Fairfield was feeding money to Madoff, the complaint alleged.

Fairfield spokesman Thomas Mulligan said it was incomprehensible for Picard to widen his lawsuit while the firm was in good faith settlement talks with the trustee.

We reject absolutely the allegation that Fairfield Greenwich or any of its executives or employees was aware of the fraud or in any way abetted it, Mulligan said.

Fairfield remains willing to work toward a settlement that will help all victims of the Madoff fraud move beyond this disaster, he added.

Picard, a partner at the law firm Baker & Hostetler LLP, has said that through March 31 he had recovered more than $1.5 billion of assets for Madoff victims.

Fairfield Sentry Ltd, one of the original defendants in Picard's lawsuit, was put into liquidation in July 2009 after feeding about $7.2 billion of client assets to Madoff.

Last September, Fairfield agreed to pay $8 million to settle claims by Massachusetts residents who invested in the Sentry funds.

Madoff was arrested on December 11, 2008, and pleaded guilty to orchestrating a $65 billion Ponzi scheme three months later.

The 72-year-old is serving a 150-year sentence in a North Carolina federal prison.

The case is Picard v. Fairfield Sentry Ltd et al, U.S. Bankruptcy Court, Southern District of New York, No. 09-01239.

(Reporting by Jonathan Stempel, editing by Gerald E. McCormick, Ted Kerr and John Wallace)