European victims of Bernard L. Madoff’s Ponzi scheme can’t directly sue custodian banks such as UBS Group AG, Luxembourg’s highest court said.
Luxembourg’s Cour de Cassation, in a ruling Thursday, upheld a 2010 decision by a lower court that blocked hundreds of individual claims by investors, telling them they had to rely instead on liquidators’ efforts to recover lost funds.
“European investors did not have a fair chance of defense in this case, the Luxembourg courts having decided to block the investors’ actions for procedural reasons,” said Edouard Fremault, a senior analyst at Deminor International, which advises more than 4,500 investors with losses in Madoff-linked funds. “How can European authorities expect financial institutions to better behave with this?”
More than six years after Madoff’s massive Ponzi scheme was uncovered, recovery efforts by lawyers representing European victims are progressing slowly. Dozens of lawsuits filed in the Grand Duchy against the custodians overseeing the funds, including HSBC Holdings Plc and UBS, have stalled.
Hundreds of suits had been filed in Luxembourg against UBS over its custodian duties to Access International Advisors LLC’s LuxAlpha Sicav-American Selection, an investment vehicle that failed after Madoff’s activities were discovered.
“We welcome this decision,” Serge Steiner, a spokesman for Zurich-based UBS said by telephone.
LuxAlpha had invested 95 percent of its money with Madoff and had $1.4 billion in net assets a month before the former Nasdaq Stock Market chairman’s December 2008 arrest.