How Ponzi investors should be paid "turns on the details of a particular fraudulent scheme," with little application for the majority of investors, the SEC said.
"Purported increases in the value of customers' accounts, moreover, were entirely fictitious," validating the lower court rulings, it said.
Picard's formula for compensating victims is to figure their loss of principal, then allot them a share of the money he says he has raised by suing or settling with investors who allegedly knew of the fraud. Investors with net gains, who took out more money than they put in, have to wait until net losers get paid in full.
Thousand Lawsuits
The trustee, who filed more than 1,000 lawsuits claiming $100 billion, said last year he hoped to raise enough money to pay all investors back in full, including those with false profits on the account statements. Since then, federal judges led by U.S. District Judge Jed Rakoff in New York have dismissed about $90 billion of Picard's claims.
Picard and his law firm have charged $273 million for their Madoff work so far. Madoff is in prison, serving a 150-year sentence for fraud.
In a separate matter, New York state settled a lawsuit for $410 million with J. Ezra Merkin over claims that Merkin funds secretly placed client money with Madoff.
The agreement provides $405 million to compensate investors and $5 million for the state, according to a June 24 statement by the office of New York Attorney General Eric Schneiderman. In the case, filed in 2009 by Schneiderman's predecessor, Andrew Cuomo, the state claimed Merkin steered assets to Madoff and concealed Madoff's role.
Andrew Levander, an attorney for Merkin, said in a statement that his client "is pleased to have achieved a resolution that is fair to his investors."
The docket for the Supreme Court appeal can be found in Velvel v. Picard, 11-00986, U.S. Supreme Court (Washington). The Madoff brokerage liquidation case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, 08-01789, U.S. Bankruptcy Court, Southern District of New York (Manhattan).