NEW YORK (Bloomberg) — Banyon Investments LLC, a hedge fund in Fort Lauderdale, Florida, invested $775 million in the alleged $1.2 billion Ponzi scheme run by Scott Rothstein, bankruptcy court records show.

Banyon's investments make it the largest creditor of Rothstein's defunct law firm, which collapsed amid allegations he was running a Ponzi scheme, according to the list of 20 top creditors filed in US Bankruptcy Court in Florida December 2.

Rothstein, 47, pleaded not guilty on December 1 to charges that he ran the alleged scheme since 2005. He sold investors stakes in fictitious legal settlements, prosecutors said.

A lawsuit against Rothstein by alleged victims names Banyon and its chief executive officer, George Levin, as defendants who knowingly participated in the scheme. Through Banyon funds, Levin invested as much as $75 million a month with Rothstein, buying more than $1.1 billion of legal settlements at a discounted $657 million even though he knew they were phony, according to the lawsuit, which was amended on November 25.

Banyon assets funneled to Rothstein "served as rocket fuel blasting the obscure investment vehicle to dizzying heights," according to the lawsuit, brought by individual and institutional plaintiffs in state court in Fort Lauderdale.

Banyon's pitch to investors was that they were buying stakes in accounts that held payments already made from lawsuit settlements, which would be audited by a so-called Big Four firm quarterly, according to the lawsuit. It cited offering documents and testimony from one of the plaintiffs, D&L Partners of Broward County, Florida. Plaintiffs had sold their right to future payments to get money up front, the complaint said.

Levin has denied the allegations, said Jesse Derris, a spokesman. The hedge fund manager by contrast was a whistleblower, contacting the US Attorney's office on Nov. 1 to report "irregularities" after Rothstein failed to make a payment, he said.

Banyon's goal was to buy from Rothstein "discount settlements and related periodic revenue stream from individual plaintiffs who have settled their labor and employment related lawsuits or claims and who would otherwise receive their settlement amounts over a period of time", the complaint said.

The complaint cited an offering document for the Banyon Income Fund LP, which it said was created in May 2009 to serve as a feeder fund for Rothstein.