BOSTON (Reuters) - Disgraced money manager Bernard Madoff’s suspected $50 billion fraud scheme looks set to burn even those who pulled their investments out long before the scandal rippled into the global financial system.

Such investors may have counted themselves fortunate, withdrawing their money years ago to buy a house or to pay for a daughter’s education, and may have even sighed with relief because they ended ties with Madoff long before the scandal erupted late last week.

But they, too, could face trouble, lawyers say. Because of a legal concept known as “fraudulent conveyance,” they could be forced to return their profits and even some of their initial investments to help offset losses incurred by others entangled in the long-running Ponzi scheme.

A Ponzi scheme is an illegal investment vehicle that pays off old investors with money from new ones, and relies on a constant stream of new investment. Such schemes eventually collapse under their own weight.

“There were no profits. It was just other people’s money,” said Brad Alford, who runs investment adviser Alpha Capital Management LLC in Atlanta.

Alford is well versed in fraudulent conveyance after one of his clients withdrew money from a $450 million scheme by Connecticut hedge-fund company Bayou Group LLC a year before it collapsed in scandal. “We ended up settling with the estate, giving back all the profits and half of our principal.”

Bankruptcy-receivership practices make all investors vulnerable, he added. “Once they can go into bankruptcy they can go back six years. Anything past your principal, I’m guessing, is fair game to be brought back in.”

Philip Bentley, a lawyer at Kramer, Levin, Naftalis & Frankel LLP, who defended investors sued in 2006 by lawyers representing the Bayou estate, said he expected the court-appointed trustee now in control of Madoff’s U.S. operations to look hard at who withdrew money from Madoff.

“The trustee is going to look very closely at redemptions and seriously consider bringing suits just because the trustee’s job is to bring in assets any way he can,” Bentley said. “Potentially the numbers are enormous.”

‘STAGGERING’ LAWSUITS

But the judge could decide to limit how many years back the estate can demand investors return their money, said Jay Gould, a former investment-management attorney at the Securities and Exchange Commission who heads the hedge-fund practice at Pillsbury Winthrop Shaw and Pittman LLP.

“In this case, because of the magnitude of the losses and the scope of the great number of people who were defrauded, this could be a situation where people say ‘you know we are just going to draw the line here at six months or at one year or at this,’” he said.

“But that’s not certain. You really are working with people who have obligations,” he said. “The receiver has an obligation under the law to pursue all the assets wherever they happen to be within the bounds of the law.”

The law could shock investors who innocently entrusted their money with Madoff, a 70-year-old Wall Street legend, long before he was accused of defrauding banks, charities and rich individuals whose assets he managed at Bernard L. Madoff Investment Securities LLC, which he launched in 1960.

“I’m sure it will be a surprise to those who had no idea about his position but wanted to buy a house, and took the money out,” said Tamar Frankel, who teaches securities law, corporate governance and legal ethics at Boston University.

Alford said he expects several types of lawsuits, including one focused on fraudulent conveyance and another against so-called feeder funds, or hedge funds set up by outside investment advisory firms that marketed Madoff’s investments to high net-worth individuals and pension funds.

And he expects a third group of lawsuits to focus on litigation against advisers for entrusting 50 to 100 percent of their money with one manager. He said this could defy the “prudent man rule” that enjoins money managers to handle investors’ money as they would their own.

“I think the lawsuits are going to be staggering. This is going to go on for years and years,” he said.