(Bloomberg News) The estate of investment advisor Stanley Chais must face claims by the trustee liquidating Bernard L. Madoff Investment Securities LLC that Chais and related entities fraudulently received more than $1 billion as "insiders" of Madoff's Ponzi scheme.

According to the Los Angeles Times, Chais hobnobbed with the Hollywood elite and made a fortune serving as Madoff's connection to the rich and powerful. Chais died in September at age 84.

U.S. Bankruptcy Judge Burton Lifland refused to dismiss trustee Irving Picard's lawsuit seeking to recover allegedly fraudulent withdrawals made by Chais and his family partnerships during a 13-year period starting in 1995, according to the ruling filed yesterday in federal bankruptcy court in Manhattan.

Lifland did dismiss Picard's claim seeking the immediate turnover of transferred funds. Picard sued Chais and related entities in May 2009 saying Chais was a beneficiary of the Ponzi scheme for at least 30 years and "knew or should have known that they were reaping the benefits of manipulated purported returns, false documents and fictitious profits."

Chais, who was among Madoff's largest investors, denied wrongdoing and said he was duped by Madoff. The defendants in the Picard suit are Chais family members and trusts that the family oversees, according to Lifland's ruling.

Philip White, an attorney for the Chais entities, didn't immediately return a voice-mail left after regular business hours.

Madoff pleaded guilty and is serving a 150-year prison sentence. At the time of his arrest in December 2008, his account statements reflected 4,900 accounts with stated balances of $68 billion. Investors lost about $20 billion in principal, Picard has said.

The case is Picard v. Chais, 09-01172, U.S. Bankruptcy Court, Southern District of New York (Manhattan).