Investors who lost money investing in Madoff Securities may be eligible for compensation from the fund, which is overseen by the US’ Department for Justice and will return more than $4bn to victims.

The Madoff scandal was a Ponzi-style securities fraud that ran for decades and saw cash flow into Madoff Securities through investment partnerships, funds of hedge funds, trusts, UCITS, insurance and annuity programs and many other types of financial products.

Mastermind of the scheme Bernard Madoff, (pictured) was arrested on 12 December 2008 and is serving a 150-year sentence, after confessing to a $50bn fraud. The trustee liquidating Madoff’s New York investment firm said customers lost about $17.3bn (£10.7bn).

The fraud hit banks, including J.P. Morgan, hedge funds and individual investors. Madoff claimed both banks and funds knew what he was doing.

The appointed ‘Special Master’ of the compensation fund Richard C. Breeden said: “[The scandal] inflicted immense financial harm and personal anguish on victims around the world.

“Madoff’s appetite for cash was voracious, and thousands of investment products or funds were used to raise money.

“Investor money was often routed through multiple entities before reaching Madoff Securities.”

Although a large majority of victims have gone five years without a significant recovery, they will now be able to recover funds if they had their own money invested in Madoff Securities and “suffered an actual loss when the fraud was exposed”.

The MVF runs alongside a bankruptcy program, which compensates claimants which held a direct account with Madoff Securities. However, this was a distinct minority.

Breeden said: “Out of approximately 16,500 claims in the bankruptcy proceedings, claims covering only 2,186 accounts were allowed (roughly 18%). More than 14,000 bankruptcy claims were rejected, most commonly because the individual invested through a feeder fund or similar entity.”