* A group of 80 investors have filed a lawsuit against UBS regarding losses in a Luxembourg fund that invested in Bernard Madoff.
The LuxAlpha Sicav-American Selection, a Luxembourg UCITS fund set up by UBS in 2004, invested about 95% of the fund with Madoff. On 17 November 2008 the fund had $1.7 billion in net assets. By April 2009, it had around $51.5 million and is now being liquidated.
The 80 investors, represented by Paris lawyer Jean-Pierre Martel, claimed that the fund prospectus failed to mention any connection of Madoff and presented the fund as a relatively safe investment.
Custodians have been constantly under the cosh from the fallout of the Madoff scandal and the Lehman bankruptcy over their role in depositary liability. But investors have had little luck in recouping their losses in Luxembourg.
In January 2009, French private bank and fund manager Oddo & Cie initially forced UBS to reimburse 30 million that had been invested with Madoff in Luxalpha. However, UBS was eventually freed from its obligation to repay the LuxAlpha fund monies lost to Madoff. BNP Paribas also lost two lawsuits against UBS that would have forced the Swiss bank to release assets invested with Madoff.
UBS and Ernst & Young have already been sued by investors who lost money in the LuxAlpha fund through Access International Advisors, a Madoff feeder fund. Yet the case was heard in Luxembourg, and the defendants recently won a court ruling that stated that individual investors cannot sue for damages.
In France, it is a different story. In April 2009, a French court ruled that both Societe Generale and RBC Dexia were both liable for losses accrued by clients from the collapse of Lehman Brothers, forcing the banks to take responsibility for third-party losses. According to Bruno Prigent, deputy head of Socit Gnrale Securities Services, We were working with an asset management company that used Lehman Brothers as a prime broker, and then after the default of Lehman, we had a lot of discussions with the asset management company, and with the French regulator, about the legal responsibility of the depository. After the decision of the appeal court of Paris, we had an obligation to restore all assets.
A first hearing has been set for 25 May 2010.