Britain's biggest hedge fund is to sue anyone involved in fleecing it for $360 million (£245 million) in the $50 billion Bernard Madoff alleged Ponzi scandal.

Man Group chief executive Peter Clarke said the FTSE 100 company, London's highest-profile hedge fund group, will take legal action to recover clients' funds embarrassingly lost by its managers' decisions to invest in two Madoff funds.

“We will be suing the people involved,” said Clarke.

“We will be looking for remedies on behalf of our investors. We will take action in conjunction with our institutional investors.”

Shares in Man slumped back towards new lows today, off 161/4p to 209p, as it revealed the full extent of its client investors quitting the business as its current investments tank in value.

“Market conditions in the last three months continued to be extremely challenging with high volatility, low levels of liquidity, limited availability of leverage and year-end redemptions by many investors,” said Clarke.

Funds under management at Man have crashed from $67 million at the end of September to $53 million by the end of 2008, the group said in a quarterly trading statement.