Investors who lost money to US fraudster Bernard Madoff through a fund set up by UBS cannot seek compensation directly from the Swiss bank, a Luxembourg court ruled this morning.
The court rejected the demands of an initial small group of investors in the LuxAlpha fund who wanted to file individual claims against the bank, rather than having to go through the fund's liquidators.
Lawyers said the fact that claims will go through the liquidators should be less damaging to UBS because investors could miss out on full compensation and the public relations fall-out would be limited to a single case for each fund.
The verdict could have direct implications for many pending cases against UBS, which acted as a custodian for, but did not run, the LuxAlpha and LuxInvest funds. Together they lost about $1.7 billion to Madoff.
It could also involve HSBC's Luxembourg arm HSSL, whose Herald fund lost nearly $1 billion to Madoff.
Franc Greff, who represents clients in four of the 10 cases being reviewed, said he would appeal against the decision.
Madoff, a former non-executive chairman of the Nasdaq stock market, is serving a 150-year term in a US prison after pleading guilty last year to a worldwide Ponzi scheme that ruined large and small investors, including charities.
The LuxAlpha liquidators, appointed by a judge in April 2009 to recoup investor losses, filed a lawsuit in December, suing UBS, the fund's manager and Luxembourg's financial regulator among others.
Reuters