A federal court has approved the distribution of more than $843 million to harmed investors at insurer American International Group , the U.S. Securities and Exchange Commission said on Tuesday.

The court estimates that checks will soon be mailed to more than 257,000 AIG investors that were affected by an alleged accounting fraud at the company, the SEC said.

AIG, which has been propped up by billions of dollars in taxpayer funds, was charged with accounting fraud in 2006. The SEC alleged that the insurer falsified its financial statements from at least 2000 until 2005 and reported misleading information about its financial condition.

The company, which did not admit or deny the allegations, had repaid its ill-gotten gains, as well as penalties to the government. In 2007, a federal court authorized the SEC to establish a 'fair fund' to distribute the money to harmed AIG investors.

The commission continues to utilize the tools that Congress provided to ensure that funds are returned to harmed investors to the greatest extent possible, said Dick D'Anna, director of the SEC's office of collections and distributions, in an agency statement.

(Reporting by Rachelle Younglai; editing by Carol Bishopric)