A divided federal appeals court on Wednesday rejected New York financier Lynn Tilton's constitutional challenge to a U.S. Securities and Exchange Commission case accusing the head of Patriarch Partners of defrauding her investors.

The 2-1 decision by the 2nd U.S. Circuit Court of Appeals in New York is a victory for the SEC and its practice of pursuing more fraud cases through in-house administrative proceedings rather than in federal court, and allows the regulator to resume its case against Tilton.

Known as the "Diva of Distressed" for turning around troubled companies, Tilton was accused by the SEC of hiding the poor performance of assets underlying her Zohar collateralized loan obligation funds.

The SEC said she and Patriarch raised more than $2.5 billion for the funds, and allegedly collected nearly $200 million in improper fees.

Writing for the appeals court panel's majority, Circuit Judge Robert Sack said that because there was no final decision in the SEC administrative case against Tilton, federal courts lacked jurisdiction to hear her claim that the means by which judges overseeing such cases are appointed was unconstitutional.

Critics believe administrative proceedings stack the deck against defendants because they are handled by judges on the SEC payroll, lack juries and have limited discovery and depositions.

Tilton and others have said the naming of the judges violates the U.S. Constitution's "appointments clause," and that judges should be appointed by SEC commissioners.

"By enacting the SECs comprehensive scheme of administrative and judicial review, Congress implicitly precluded federal district court jurisdiction over the appellants' constitutional challenge," Sack wrote.

David Zornow, a lawyer for Tilton, did not immediately respond to requests for comment. SEC spokeswoman Erin Stattel declined to comment.

The case is Tilton et al v SEC, 2nd U.S. Circuit Court of Appeals, No. 15-2103.