NEW YORK (Reuters) — A federal judge has dismissed an attempt by investors in a hedge fund company to block a $263 million payment to a unit of bankrupt Refco Inc. that they said was in fact their money.In a decision filed on Wednesday with the US bankruptcy court in Manhattan, US District Judge Richard Berman said the investors lacked standing to appeal the June 8 settlement authorising the payment and failed to show that US Bankruptcy Judge Robert Drain abused his discretion by approving it.

Among the investors were affiliates of Merrill Lynch & Co. and Raymond James Financial Inc.. Lawyers for the plaintiffs did not on Friday immediately return calls and e-mails seeking comment on Berman's November 16 decision.

The settlement related to $312 million that the hedge fund company, Sphinx Managed Futures Fund SPC, had withdrawn from Refco Capital Markets Ltd., an unregulated broker-dealer unit, five days before Refco Inc.'s October 17, 2005 bankruptcy filing.

Refco's bankruptcy came one week after the futures and commodities broker revealed that former Chief Executive Phillip Bennett had hidden $430 million in debt. Bennett has since pleaded innocent to fraud and conspiracy charges.

The settlement came about after a committee of Refco Capital Markets' unsecured creditors sought the return of the $312 million, which they said Refco funnelled improperly to Sphinx's fund management company, PlusFunds Group Inc.

But the Sphinx investors complained that the settlement was a product of PlusFunds' "incestuous" relationship with Refco, and improperly forced them to give up the $263 million and to forfeit their claims in the bankruptcy proceedings.

Sphinx — including Christopher Sugrue, its chairman and a former Refco executive — "simply threw the fight in order to protect its own insiders, and others, from scrutiny and legal exposure," the investors said in a May 17 court filing.

Berman, however, agreed with the creditors' committee that the Sphinx investors didn't have a direct interest in Bermuda-based Refco Capital Markets, and thus lacked the right to sue.

The judge also said Drain did not abuse his discretion by approving the settlement even after a Cayman Islands court had begun considering an involuntary liquidation proceeding against Sphinx. Sphinx filed for bankruptcy protection in the United States and Cayman Islands during the summer.

Refco has said it hopes to emerge from Chapter 11 by year-end. Refco Capital Markets intends to disburse more than $2 billion to customers and creditors.