The man assigned to recover money for Madoff's victims won his biggest settlement yet -- an agreement by the estate of longtime Madoff friend Jeffry Picower to give back $7.2 billion in profits from the epic fraud.

The settlement significantly boosts the recovery pot to close to $10 billion, capping a weeks-long flurry of settlements and lawsuits around the December 11 second anniversary of Bernard Madoff's arrest and confession to orchestrating what is considered the biggest financial fraud in history.

Picower died of a heart attack in Florida in October 2009 at the age of 67 -- five months after the court-appointed trustee, Irving Picard, claimed Picower's rates of return were implausibly high from his investments and control of some Madoff accounts since the late 1970s.

This is the largest forfeiture recovery in U.S. history, Manhattan U.S. Attorney Preet Bharara said at a press conference with Picard, the Federal Bureau of Investigation and the Internal Revenue Service to announce the settlement by Picower's wife, Barbara.

Bharara said she has agreed to forfeit $7.2 billion ..., a figure that represents every last dollar of the Picowers' profit from Bernie Madoff's fraud.

Picard said that as soon as practicable after the settlement is approved by a U.S. Bankruptcy Court judge in New York, he would ask the court to begin an initial distribution of funds to customers. The approval is expected next month.

The family of the accountant and lawyer turned billionaire philanthropist said that Picower at the time of his death had been working toward reaching a settlement. His wills over the years directed most of his wealth to charity, the family lawyer, William Zabel, said.

Madoff, 72, is serving a 150-year prison sentence after pleading guilty in March 2009 to orchestrating the massive scheme. U.S. prosecutors estimated the international investment fraud took in about $65 billion over at least two decades.

The trustee has put the amount investors lost at about $20 billion and this month ramped up his global search for money, adding to lawsuits he has filed over the last two years against individuals, Madoff family members, funds and banks.

One defendant was Mark Madoff, the eldest son of Bernard Madoff, who committed suicide on Saturday's anniversary of his father's arrest. Mark Madoff and his brother Andrew ran the brokerage at the firm. They denied prior knowledge of the fraud.

Picard sued several major banks in recent weeks to bring the total sought for the victims to about $50 billion.

The banks include UBS AG, HSBC, JPMorgan Chase & Co, Citigroup Inc's Citibank, Natixis, Fortis Prime Fund Solutions Bank (Ireland) Ltd, ABN AMRO Bank NV, Banco Bilbao Vizcaya Argentaria, Nomura and Merrill Lynch, owned by Bank of America since January 1, 2009. Some of the banks have vowed to fight the lawsuits.

One lawsuit targeted Austrian banker Sonja Kohn, founder of Bank Medici, and scores of her associates or related funds and banks for $19.6 billion, including Italy's UniCredit and its unit, Bank Austria.

Barbara Picower said in a statement through her lawyer that she was absolutely confident that my husband Jeffry was in no way complicit in Madoff's fraud and want to underscore the fact that neither the Trustee nor the U.S. Attorney has charged him with any illegal conduct.

She called the Madoff Ponzi scheme deplorable. I am deeply saddened by the tragic impact it continues to have on the lives of its victims. It is my hope that this settlement will ease that suffering.

A Ponzi scheme is one in which early investors are paid with the money of new clients.

Until Friday, Picard had secured about $2.6 billion in settlements and asset sales since the collapse of Bernard L. Madoff Investment Securities LLC.

The money recovered is to be distributed to investors under the auspices of the U.S. Department of Justice and the Securities Investor Protection Corporation, an agency established by Congress to help investors of failed brokerages.

The importance of this settlement cannot be overstated, as it shows significant progress in our efforts to assemble the largest customer fund possible, Picard said in a statement.

Thousands of investors who lost money to Madoff are challenging the trustee in court over his method of calculating the so-called net winners -- clients who took out more than they deposited. Some of them lost their life savings, but Picard is still suing them in so-called clawback lawsuits, because according to his calculations, they made more over the years than they lost.

Madoff victims complain that Picard is undervaluing their losses, and an appeal of his methods is pending.

The case is Picard v. Jeffry M. Picower, U.S. Bankruptcy Court for the Southern District of New York No. 09-01197

(Additional reporting by Basil Katz; Editing by Gerald E. McCormick, Lisa Von Ahn and Richard Chang)

Settlement