Madoff Investors Can't Collect Fake Profits: 2nd Circ.

By Evan Weinberger (August 16, 2011, 12:44 PM EDT) -- The Second Circuit on Tuesday affirmed a lower court ruling that victims of Bernard L. Madoff's Ponzi scheme can only collect the principal they invested, not their paper profits, handing a big win to Madoff liquidation trustee Irving H. Picard.

The appeals court ruled that the so-called net investment method adopted by Picard, which allows for victims to collect only the money they gave to Madoff minus the amount they withdrew from their accounts, was the fairest way to compensate them. The decision affirmed a March 2010 decision in New York bankruptcy court.

Investors in the scheme challenged that decision, saying...

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