Bernard (Bernie) Madoff’s ponzi scheme defrauded an estimated 4,800 clients of an estimated 36bn USD of which half has been recovered — a crime for which Madoff, 80, is currently serving a 150-year prison sentence.
The ponzi scheme essentially saw Madoff taking large investments from clients with the promise of high returns, after which Madoff or his employees fabricated trading reports to align with the promises made to clients.
According to the Financial Times, the Luxembourg-listed ‘Luxalpha’ fund, which was managed by UBS, invested more than 90% of its managed funds into Madoff’s scheme.
When the scheme crumbled in 2008, investors were left out of pocket. Investors based in Luxembourg have accused Luxembourg’s financial regulator - the Commission de Surveillance du Secteur Financier (CSSF) - of incompetence as it has failed to bring to force its own rules on investor compensation.
Specifically, investors claim that a circular (a specific financial instrument) on investor protection states that they are entitled to receive damages should it be proven that the fund had breached its investments rules, and if the fund’s net value was not correctly calculated. The Luxalpha fund breached both of these rules, which the investors argue makes UBS liable to pay compensation.
FT: Madoff victims accuse Luxembourg of failing to take action
