A “clawback” lawsuit filed by the bankruptcy trustee in the Tom Petters case seeks to recoup at least $105.4 million in “false profits” from local hedge fund Arrowhead Capital Management, LLC, and some of its affiliates.

The suit, filed Tuesday in U.S. Bankruptcy Court in Minneapolis, alleges that Minnetonka-based Arrowhead and its affiliates could be liable for up to $5.1 billion in principal and interest that was transferred to them from Petters Company, Inc., over a period of 10 years.

The lawsuit is part of an effort by Bankruptcy Trustee Doug Kelley to reclaim cash from investors who got more from their investments than they put in-which would help compensate victims of Petters' $3.65 billion fraud scheme. The suit is the largest of its kind to date.

According to the lawsuit, every transaction between the defendants and Petters' companies was based upon “wholly fraudulent and fictitious documents and financial transactions.”

The suit also states that “defendants knew or should have known that they were benefiting from fraudulent activity, or at a minimum, failed to exercise reasonable due diligence with respect to Petters” and the companies involved in the Ponzi scheme.

The defendants-a group that includes Arrowhead founder James Fry-didn't provide investors with online access to their accounts or conduct a performance audit of the companies they were working with, according to the lawsuit. Additionally, those companies “promised and produced returns that were too good to be true”-sometimes as high as 70 percent-which should have alerted the defendants about suspicious activity.

Former Wayzata businessman Tom Petters was found guilty in December of 20 felony counts relating to fraud, conspiracy, and money laundering, for orchestrating a $3.65 billion Ponzi scheme that spanned a decade.

Petters, who maintains his innocence, was sentenced to 50 years in prison in April. His attorney filed a formal notice of appeal later that month.

Six of the seven co-conspirators who pleaded guilty to charges related to the fraud scheme-Deanna Coleman, Michael Catain, Larry Reynolds, Robert White, Gregory Bell, and Harold Alan Katz -have been sentenced within the past couple of months. A date has not yet been set for James Wehmhoff's sentencing.