Luxembourg judge 'freezes' some assets of Madoff feeder vehicle Luxalpha

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Luxembourg judge 'freezes' some assets of Madoff feeder vehicle
By Peggy Hollinger in Paris and James Mackintosh in,London and Joanna Chung in New York

Published: January 13 2009 02:00 | Last updated: January 13 2009 02:00

A Luxembourg judge has frozen some assets held by UBS for Luxalpha, one of the principle European investment funds that gave money to US money manager Bernard Madoff, a lawyer in the Grand Duchy said yesterday.

The move is believed to be the first legal action in Europe connected to the $50bn fraud scheme allegedly operated by Mr Madoff.

Separately in New York, a US judge has ruled that Mr Madoff can stay out of jail while he awaits his trial. US magistrate Judge Ronald Ellis denied prosecutors' requests to jail him pending trial because he posted packages containing more than $1m in jewellery and other assets to friends and family members.

Karine Vilret Huot, lawyer for an unnamed French investor, said that the assets of an account held by the UBS subsidiary in Luxembourg on behalf of Luxalpha were frozen by a judge there several days ago.

A hearing was held yesterday and the investor's claim - believed to be in the order of €1m ($1.3m) - is being considered by the court. The investor claims to have sought to cash in his account at the $1.4bn fund in October or November, well before Mr Madoff's arrest in December, but he sought the asset freeze after learning of the alleged fraud.

The alleged "Ponzi" scheme run by Mr Madoff has already sparked several lawsuits in the US against Mr Madoff and some of the "feeder funds" that funneled money to him.

The Luxalpha asset freeze appears to be the first court action in Europe, but almost certainly will not be the last. Another private investor in a second UBS-run feeder fund, Luxembourg Investment Fund-US Equity Plus, is also considering legal action against the Swiss bank. Others are considering joining forces with a view to possible joint action against UBS and Ernst & Young, auditors to the feeder funds.

Deminor, the shareholder group, has publicly said it is looking at its options for action. UBS declined to comment. Bank insiders have said the two Luxembourg funds were not actively marketed by the bank and were set up at the specific request of clients who wanted to send money to Mr Madoff.

UBS was custodian bank to Luxinvest and Luxalpha, and though this responsibility had legally been delegated to third parties in some cases, investors argue it still had the duty to verify that the assets existed.
Copyright The Financial Times Limited 2009