(Bloomberg News)  The U.S. Supreme Court won't hear an appeal by Bernard Madoff's investors over whether they can recover lost profit, an action that lets stand the Madoff trustee's calculation that investors lost $17 billion.

The investors asked the top court for a hearing after federal appeals judges in New York said in August it would be "absurd" to treat fictitious paper profits as real, upholding a lower court ruling. Madoff trustee Irving Picard held back on distributing more money from a $2.3 billion fund for the con man's customers, not knowing if he must pay 4 cents on the dollar each to the larger pool of investors, or about 13 cents to those who lost principal.

The end of the line for the appellants means the payments can resume, said traders and lawyers. Picard so far has distributed just $330 million to customers in the three-and-a-half years since Madoff's 2008 arrest.

"I think the trustee is very sympathetic to investors and it will be at least a dime," or a total of $1.8 billion, said Joseph Sarachek, managing director of claims trading at CRT Capital Group LLC, which buys and sells distressed debt including the Madoff brokerage's.

Madoff investors who took more money from their accounts than they put in, including the owners of the New York Mets baseball team, argued that securities laws require Picard to use their account statements to calculate their losses, and compensate them accordingly.

Lower court judges said Picard can ignore fictitious profits on Ponzi money, and calculate losses by looking at how much of an actual investment disappeared--money put in minus money taken out.

Appeal Dropped
The Mets owners dropped their appeal to the Supreme Court after settling a lawsuit against them by Picard.

Before conferring June 21 on whether to hear the appeal, the Supreme Court justices asked the U.S. Securities and Exchange Commission the SEC to file papers on whether the liquidator of the con man's brokerage is using the right formula to compensate investors.

The SEC said he was. Moreover, the subject wasn't of great importance to the nation, and doesn't justify attention from the nation's top court, the SEC said. In the past 18 years, only seven Ponzi schemes have been liquidated, it said.
"Petitioners thus do not present an issue of recurring significance warranting this court's review," the SEC said in a May filing, made on its behalf by the U.S. Solicitor General, who supervises government cases before the high court.

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.