Madoff 5th anniversary: a dead-end situation in Luxembourg, but some hope for active investors thanks to the Madoff Victim Fund in the USA
A dead-end situation in Luxembourg
Five years after the revelation of the fraud, the situation in Luxembourg - where many so-called “Madoff Feeder Funds” were set up and/or whose service providers (e.g., custodian banks) were registered – is at full stop. Despite initial reassuring statements from the Luxembourg authorities, not a single euro has been distributed to European investors to date. The potential recovery of European investors is entirely dependent on endless legal proceedings, which have made no substantial progress since their initiation in 2009. Even worse, the right of investors to claim damages directly from the custodian banks has been declined by the local courts, in sharp contrast with the text of the UCITS European directive.
Deminor writes today to the (new) Prime Minister and Minister of Finance of Luxembourg to share the concerns of the 2,500 investors it defends, hoping that the new Luxembourg government will firmly tackle this issue which has tarnished the reputation of Luxembourg SICAVs as safe investment products.
Some hope for active investors thanks to the Madoff Victim Fund in the USA
Deminor estimates that European investors have probably lost around $10 billion due to Madoff fraud. Following a decision announced on 18 November 2013 by the US Department of Justice, investors in “Madoff Feeder Funds” will in principle be eligible to share in the distribution of a special fund set aside to compensate victims of the Madoff fraud (the “Madoff Victim Fund”). Most affected European investors, who have indirect exposure to Madoff through feeder funds, have been excluded from any recovery so far; hence this is a unique opportunity for them to recover part of their losses, especially in light of the dramatic situation in Luxembourg.
However, in order to benefit from this distribution, European investors cannot remain passive and therefore have to file a claim with the US authorities before February 28, 2014. Failure to do so in the appropriate manner will deprive the European investors from a partial recovery. They are advised to inform themselves about this procedure as soon as possible.
Written on Dec 12, 2013 by