At the hearing, David Sheehan, a lawyer working for Picard, called the alleged fraud "a Ponzi scheme where no stock was purchased."
Sheehan also said the Securities Investor Protection Corp., or SIPC, will be trying to recover "false profits" earned by some investors.
"There wasn't any stock bought or sold," he said. "It was all just made up. ... You got somebody else's money."
Congress created the SIPC in 1970 to protect investors when a brokerage firm fails and cash and securities are missing from accounts.
Picard said he has recovered $650 million so far and noted that victims could qualify for up to $500,000 in funds from SIPC.
He said his office and criminal investigators are reviewing a mountain of evidence, including 7,000 boxes of records at a Queens warehouse that go back more than a decade.
Sheehan added that investigators are reviewing "thousands and thousands of e-mails" from Madoff's operation.
Picard said his office plans to issue dozens of subpoenas in the coming weeks related to Madoff's business dealings.
He cautioned that the criminal investigation is ongoing and said: "We are operating out of a crime scene. There is a limit to what we can say."
The meeting in lower Manhattan was for investors who lost money because of the alleged fraud. An auditorium that holds 460 was mostly full although it wasn't clear which of those attending had actually invested with Madoff.
One investor complained about both Madoff and the federal Securities and Exchange Commission.
Raymond Spungin, 77, of Staten Island told Picard he had checked with the SEC before investing with Madoff in the early 1990s.
"They said Madoff was the greatest," he said. "We're the victims not only of Madoff but of the incompetence of the SEC." He and his wife believe they had $1.8 million in two accounts.
Experts have said that the first of any recovery payments for investors who lost money with Madoff might be years in the future.
The most likely source is liquidation of Madoff's personal assets and any cash in accounts tied to the investment firm. Picard has identified more than $830 million in liquid assets that may be subject to recovery -- far short of the potential tens of billions of dollars in losses.
Madoff has homes in Montauk, N.Y. and Palm Beach, Fla., a penthouse in Manhattan and a handful of luxury yachts. Prosecutors have accused him of mailing off millions of dollars in personal assets to family members while under house arrest.
Outside of liquidating assets, some investors in the scheme could actually be on the hook to make payments in a situation known as "clawbacks." In that case, investors that received alleged profit payments might have to return the money for redistribution.
Sheehan said the assets of Madoff "insiders" could also be seized and liquidated.
"We are looking at every member of the Madoff family," he said.