Plans to distribute more recovered funds from Bernard Madoff’s fraud scheme can proceed, after the Supreme Court declined to review a legal challenge to the trustee’s calculation of net equity.

The net equity calculation methodology determines customers’ eligibility for pro rata distributions with allowed claims from the customer fund. It is based on “cash-in, cash-out” of Bernard L Madoff Investment Securities. The Bankruptcy Court’s approval of the methodology was appealed, but the Supreme Court’s decision ends the appeal process.

“This settles the issue once and for all and allows us to seek approval for a second distribution of recovered funds to Madoff customers,” said Irving Picard, the SIPA trustee in the liquidation of the giant Ponzi scheme.

A distribution will happen “in the near future,” said Stephen Harbeck, president and chief executive of the Securities Investor Protection Corporation (SIPC), in a joint statement with Picard.

The trustee has so far recovered or reached agreements to recover around $9.1 billion, and has distributed around $1.1 billion to victims. The first distribution of $332.6 million, relating to 1,230 accounts or about 4.6 per cent of losses, started on 5 October 2011. Victims have also received around $801.3 million in advances requested by the trustee from the SIPC.

Picard and Harbeck said the second interim pro rata distribution could increase if there is no further appeal by 16 July 2012 by the Jeffry Picower estate, which forfeited around $7.2 billion to the US government including a $5 billion settlement with the trustee. Picower, now deceased, was a long-time investor with Madoff.

“Without exception, higher courts have upheld the Bankruptcy Court’s approval of the landmark Picower settlement. We are hopeful that there will be no further delay in our ability to return those funds to their rightful owners,” said Picard.

Meanwhile, appeals of settlements including the $1.025 billion Tremont settlement and the $220 million settlement with the Norman Levy family need to be resolved.

“Ongoing litigation and other matters – such as the potential for an interest or constant dollar calculation – also require that significant funds continue to be held in reserve,” said Picard.