(Bloomberg) -- Deutsche Bank accused a pair of offshore funds of failing to follow through on a deal to sell the German lender $1.6 billion in claims against Bernard Madoff’s bankrupt investment advisory business.

Kingate Global Fund Ltd. and Kingate Euro Fund Ltd., which funneled client money to Madoff’s firm for years before his Ponzi scheme collapsed in 2008, have “sellers’ remorse” because the value of the claims has grown since they struck their purported deal in 2011, Deutsche Bank said in a lawsuit filed Thursday in Manhattan federal court.

The British Virgin Islands funds filed for bankruptcy protection in New York in September in anticipation of the lawsuit, telling the court that the funds need to protect their anticipated U.S. assets to pay their own creditors.

Robert Loigman, a lawyer for the funds in the bankruptcy case, said the suit it “utterly without basis” because Deutsche Bank never closed on the trade.

“Deutsche Bank has now reappeared, claiming it is entitled to benefit from a trade that it rejected so many years ago,” he said in a statement. “Simply put, Deutsche Bank wants to deprive the funds’ investors of their recoveries” from the Madoff estate.

Sell Claims

According to the complaint, the Kingate funds agreed to sell the claims to Deutsche Bank Securities Inc. for 66 cents on the dollar once the claims were formally allowed by the trustee for Madoff’s company, Irving Picard. The claims are now on the verge of being allowed after the trustee settled his lawsuit against the two funds in June, the bank said.

The lawsuit seeks unspecified damages. But Deutsche Bank’s complaint indicates it is out about $59 million -- the difference between the value of the Kingate funds’ soon-to-be-allowed claims, about $1.66 billion, and the $1.6 billion purchase price.

In July, the offshore liquidators for the Kingate funds reached an $860 million settlement with Picard. The deal essentially forces the funds to use their recoveries from the Madoff bankruptcy case to finance the settlement. The trustee has used such litigation to recover more than $13 billion for thousands of victims who invested directly with Madoff.

The Kingate funds were founded in 1994 by two Italian investment advisers operating out of London. Among Madoff’s biggest offshore “feeder” funds, they invested about $1.7 billion with Madoff for their clients and lost about $750 million when the scam unraveled.

Read More: Madoff Trustee Strikes $860 Million Deal With Kingate Funds

(Update with Kingate lawyer’s comment)

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Peter Jeffrey

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