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NEW YORK — A federal judge on Monday threw a lifesaver to investors who may have been duped in one of Wall Street’s biggest alleged frauds, saying they need the protection of a special government reserve fund set up to help investors at failed brokerage firms.

U.S. District Judge Louis L. Stanton ordered that clients of Bernard Madoff’s private investment business seek relief under a federal statute created to rescue cheated investors. Stanton also ordered that the business be liquidated under the jurisdiction of a bankruptcy court and named attorney Irvin H. Picard as trustee to oversee that process.

Stanton signed the order after the Securities Investor Protection Corp. asked that steps be taken to protect investors in the scheme, which has ensnared several major banks and prominent figures as victims and could result in as much as $50 billion in losses.

The 70-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they have been wiped out, and it is thought many more are yet to come forward.

The list of the funds, firms, foundations and individual investors that have some exposure to the Madoff scandal reads like a Who’s Who. The Royal Bank of Scotland, Steven Spielberg and Sen. Frank Lautenberg are among the victims.

But Madoff’s alleged malfeasance also has affected the less well known.

In Fairfield, Conn., town officials scrambled Monday to get a handle on damage to pension funds held for its police officers and firefighters. The Robert I. Lappin Charitable Foundation, a Salem, Mass., organization that sponsors Jewish educational program is being forced to close it’s doors.

"It’s devastating to people and communities and lives," said Deborah Coltin, executive director of the Lappin Charitable Foundation.

Stanton’s order came just days after federal prosecutors charged Madoff with securities fraud, saying he had admitted to orchestrating a massive Ponzi scheme. Madoff is free on $10 million bail after he was charged with securities fraud last week payday loans for bad credit. Ira Lee Sorkin, Madoff’s lawyer, declined to comment.

Though Stanton’s order could provide some relief to Madoff investors, it will only cover a small percentage of the overall loss they may suffer.

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Congress created the SIPC in 1970 to protect investors when a brokerage firm fails and cash and securities are missing from accounts. Funds can be used to satisfy the remaining claims of each customer up to a maximum of $500,000. The figure includes a maximum of up to $100,000 on claims for cash.

The SIPC will oversee the liquidation of the Madoff funds, but how much will come from that is unknown. SIPC President Stephen Harbeck said in a statement that the fund’s task will be harder than in other bankruptcies because of the size of the misappropriation and the condition of the defunct firm’s records.

Harbeck said it would be unlikely that the trustee can transfer the firm’s customer accounts to a solvent brokerage firm. He added that it was impossible at this point to determine what share each investor might hold in any remaining assets.

The impact of Madoff’s arrest wasn’t only felt in the U.S. Among those overseas confirming exposure on Monday, Banco Santander, the largest bank in the euro zone by market capitalization, said its clients have $3.07 billion invested with Madoff, mostly through a fund called Optimal Strategic US Equity.

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