UBS starts to pay Madoff-hit investors - UBS to face Pay Out Demands

UBS starts to pay Madoff-hit investors
By Peggy Hollinger and Scheherazade in Paris and Haig Simonian in Zurich
Published: January 16 2009 20:05 | Last updated: January 16 2009 20:05
UBS has begun to reimburse certain investors in the Luxalpha fund, one of the main European funds affected by the $50bn fraud allegedly orchestrated by US financier Bernard Madoff.

Sofra, the French investor that early this week won a freeze of Luxalpha assets held in a UBS managed account, is expecting to receive its €1m ($1.32m) investment back, said Karine Vilret-Huon, a lawyer representing Sofra and other investors.

Other clients who had either subscribed to Luxalpha or sold shares during November – before news of Mr Madoff’s arrest broke on December 12 – had also received notice that they would be reimbursed, she said.

The moves follow the Luxembourg court ruling on Thursday that UBS should release €30m to French investment group Oddo Cie, whose investment had been sold on November 17.

A UBS spokesman confirmed the bank had repaid Oddo but said he was unaware of other reimbursements.

Meanwhile, the legal repercussions of the scandal widened as angry investors filed lawsuits against three French intermediary banks to demand information on how their money had been used.

BNP Paribas confirmed it had received a summons to disclose documents on behalf of one or two clients. “This case concerns a few sophisticated individuals who acted on the recommendation of someone else. BNP Paribas did not advise clients to invest in Madoff funds.”

The strategy has been led by Véronique Lartigue, of Lartigue-Tournois law firm, who represents a group of wealthy private individuals with investments totalling about €25m in Luxalpha.

Many of these clients have been unable to pursue their claims against Luxalpha or UBS, which acted as the custodian bank for the fund, as they are not recognised as the shareholders. Their shares were purchased through intermediaries and both UBS and Luxalpha have failed to respond to their requests, lawyers said.

Until now UBS and HSBC, as custodians for the Madoff feeder funds in Europe, have been the focus of investor lawsuits.

The affair has sparked a political spat between Luxembourg and France, where some of the country’s wealthiest individuals are believed to have been caught out by the “Ponzi” scheme.

Christine Lagarde, French finance minister, has called into question Luxembourg’s interpretation of EU rules on investment funds and said that differing interpretations risked weakening investor confidence. Luxembourg has insisted that its regulations are as strict as its neighbours.