Two investors who lost more than $2.4m in the Bernard Madoff “Ponzi” scheme have filed suit against the US Securities and Exchange Commission, claiming that the government agency responsible for protecting investors was negligent in its oversight of Mr Madoff’s operations.

The suit, filed on behalf of Phyllis Molchatsky and Steven Schneider, alleges that, because the SEC failed to uncover the $65bn fraud, which flourished for more than two decades, the government should compensate Ms Molchatsky by paying her $1.7m, and by paying Dr Schneider $750,000 – the amount they lost.