Madoff trustee wins ruling on returning losses

The trustee liquidating Bernard Madoff's former firm has won an appeals court ruling backing his method of working out which investors can recover money lost in the Ponzi scheme.

New York's federal appeals court ruled yesterday that trustee Irving Picard can calculate losses using the so-called "net investment" method, according to Bloomberg.

The method subtracts the amount withdrawn from an investor's account from the total placed with Madoff (pictured).

A group of Madoff victims had urged the court to require Picard to use their final account statements, reflecting fictitious profits on money Madoff never invested, to determine losses.

Today's ruling limits the number of victims who can claim money from the fund Picard oversees and reduces the amount of many eligible claims.

"Mr. Picard's selection of the net investment method was more consistent with the statutory definition of ‘net equity' than any other method advocated by the parties or perceived by this court," Chief U.S. Circuit Judge Dennis Jacobs wrote in the opinion.

"Use of the Last Statement Method in this case would have the absurd effect of treating fictitious and arbitrarily assigned paper profits as real and would give legal effect to Madoff's machinations."