Clients of J. Ezra Merkin, a prominent Wall Street hedge fund manager who invested his clients’ money in Bernard L. Madoff’s epic Ponzi scheme, will recover more than $400 million under a civil settlement negotiated by the New York State attorney general’s office.


The deal was approved by a New York state judge late Friday night, according to people in the office of New York Attorney General Eric T. Schneiderman; it is expected to be publicly announced on Monday.


Mr. Merkin, whose funds lost roughly $1.2 billion when Mr. Madoff’s fraud collapsed in December 2008, has agreed to pay $405 million over three years to compensate his investors. He also will pay an additional $5 million to the state to cover fees and costs, those people said.


The agreement settles a civil fraud case the state filed against Mr. Merkin in April 2009. That case accused Mr. Merkin of deceiving his clients by concealing the fact that he was simply handing their money over to Mr. Madoff, not managing it himself under the parameters set out in their investment agreements.