---Koch Industries was sued in 2012 for the return of fake profit

---More than $2 billion at stake in similar lawsuits by trustee

Billionaire brothers Charles and David Koch have made plenty of good business decisions over the years. Placing millions of dollars with Ponzi-scheme mastermind Bernard Madoff may have been one of them.

Koch Industries Inc. invested an unknown sum with the con man's now-defunct securities firm years ago, and walked away with $21.5 million in profits before Madoff's arrest in 2008. But since 2012 the company run by the conservative-activist brothers, worth today a combined $109 billion, has refused legal demands to return the money.

Charles and David Koch

Photographer: Patrick T. Fallon for The Washington Post via Getty Images/Peter Foley/Bloomberg

Irving Picard, the trustee liquidating Madoff's firm, contends in a suit that the cash is fraudulent proceeds of the fraud and should be shared among the thousands of victims. Koch Industries, and dozens of other early investors named in 87 other lawsuits, argue the company can keep the profits because the money was sent overseas and is beyond U.S. jurisdiction. At stake: a total of $2 billion.

The battle is coming to a head in Manhattan bankruptcy court, where Judge Stuart Bernstein could rule within weeks on a key issue affecting Picard's suit. The defendants claimed a victory in 2014 when U.S. District Judge Jed Rakoff said that money transferred overseas is generally out of Picard's reach. In the Koch case, the $21.5 million was sent in 2005 to a fund based in the British Virgin Islands, and then to a Koch entity in Britain, filings show.

'Not Crazy'

Picard is claiming the transactions were essentially domestic transfers made to appear foreign.

"The trustee is not crazy -- he has a very decent argument," said John Pottow, a bankruptcy law professor at the University of Michigan Law School.

Koch Industries has said the suit lacks merit. "The Koch entity involved made an investment in an entirely separate fund," Koch spokesman Rob Carlton said in an e-mail. "That Koch entity no longer exists, and its investment was redeemed in 2005, long before anyone knew of Madoff's fraud."

Picard's spokeswoman, Amanda Remus, declined to comment.