Press Release Madoff – Luxalpha SICAV



Madoff – Luxalpha SICAV

The Luxembourg Supreme Court (Cour de Cassation) denied the right of European investors to claim damages from third parties such as custodian bank and auditors

Do Luxembourg SICAVs in 2015 deserve their reputation as safe investment products?

Today, the Luxembourg Supreme Court (Cour de Cassation) rendered its long-awaited judgement about the legal standing of investors in Luxalpha, a so-called “feeder-fund” of Bernard L. Madoff Investment LLC (“BMIS”) distributed to European investors, in respect to the investors’ ability to claim damages from the Luxembourg unit of UBS that was the promoter, custodian, administrator and investment manager of Luxalpha, an UCITS investment fund incorporated in Luxembourg.  The same goes for the fund’s auditors Ernst & Young.  In stark contrast with the text of the European directive on UCITS, the Luxembourg Supreme Court denied the right of investors to claim damages from these service providers. 

Deminor deplores that European investors have been deprived of their rights by the Luxembourg courts to enforce claims derived from EU law, despite the blatant liability of service providers based in Luxembourg.  Our analysis, as confirmed by hundreds of pages of documents filed for instance in US-related litigations, demonstrate that the fraud was detectable and that financial institutions and other professionals in charge knowingly turned a blind eye on the risks associated with BMIS in order to protect their commercial relationships and collect additional fees.  The prospectus of Luxalpha SICAV (and other Luxembourg SICAVs such as Herald Lux and Luxembourg Investment Fund), as approved by the Luxembourg supervisory authorities, never mentioned the role of BMIS, while it actually appears that the latter was in full control of the fund’s assets after the Swiss bank fully delegated its functions of custodian and investment manager to BMIS, it being understood that these delegations were not disclosed in the prospectus on the basis of which European investors made their investment decision. 

Since December 2008, Deminor has been calling the state of Luxembourg to take its responsibility in the Madoff scandal.  Despite initial reassuring statements from the Luxembourg authorities (in June 2009, Luc Frieden, the then Luxembourg Ministry of Finance, told Bloomberg that “The principle is very clear: the custodian bank has to indemnify investors” and “Regarding the law, the situation is not that difficult: the custodian bank has a responsibility to make restitution for these asset »), the reality is that more than 6 years after the revelation of the fraud (!), any of these service providers have been held accountable by a court in Luxembourg.  The potential recovery of European investors is therefore entirely dependent on endless legal proceedings initiated by court-appointed liquidators, which have made no substantial progress since their initiation in 2009. 

We hereby strongly reiterate our statement issued in an open letter of December 2012 to the investors community:  Do Luxembourg SICAVs deserve their reputation as safe investment products?  Today, the answer is no.  European investor protection may look nice on paper, but without a strict enforcement by Member States’ courts, European legislation is meaningless.  How can we expect financial institutions to comply with new regulations if they are not held accountable for having violated the old or existing rules?

About Deminor Recovery Services: Deminor Recovery Services, a company specialized in investor protection, investment recovery and corporate governance, currently advises approximately 4,500 investors across the globe (excluding the USA) who have invested in the so-called Madoff feeder-funds distributed outside the USA.  Deminor started various legal procedures aimed at recovering damages from the service providers and the funds in Luxembourg and the Netherlands, in addition to having undertaken the formalities related to the Madoff Victim Fund.  For further information, please visit:


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Contact Person

Edouard Fremault


+32 (0)2 674 71 33