At the occasion of the 4th anniversary of the revelation of the Madoff scandal, Deminor has issued a Position Statement on behalf of its clients, 2,500 investors in the so-called "Madoff feeder funds". Four years after the revelation of the fraud, these investors are still struggling to get their monies back and, even worse, are trying to be heard by European courts. The enforcement of European rules aimed at protecting investors in funds, including UCITS funds, is deficient. Among other problems, Deminor has identified the lack of fair access to justice, the length of proceedings and the possibility for defendants to use delaying tactics as the main weaknesses of the current investor protection system.
Despite overwhelming evidence that the service providers of the "Madoff feeder funds" have been grossly negligent, that they have acted recklessly and that in some cases they have knowingly breached European and national rules relating to the set-up and functioning of UCITS funds, these service providers have not been held accountable to date. After four years of proceedings, not a single debate on the merits has taken place before a European court. The service providers, among whom major institutions like UBS and HSBC, have been exploiting these inefficiencies to escape their responsibility. As a consequence, investors in "Madoff feeder funds" have not received a single Euro back, whereas direct Madoff investors in the U.S. have started recovering their losses.
Authorities have reacted by introducing more legislation. However, we do not need more regulations the cost of which will necessarily be shifted towards the end-consumers, i.e. the investors in the funds. Investors need a better and more efficient enforcement of existing rules. This is the main lesson that authorities should draw from the current situation.
Deminor has focused its attention on Luxembourg, where most of the "Madoff feeder funds" have been set up and/or where most of the management, administration and custody of these funds has taken place. Already on December 12, 2011, at the occasion of the third anniversary of the Madoff scandal, Deminor handed over to the Luxembourg Minister of Finance, Mr. Luc Frieden, a letter signed by more than 750 investors. In the letter Deminor complained about Luxembourg's failure to offer protection to the thousands of investors who relied on Luxembourg institutions to manage, safe-keep and control their investments. Despite various reminders, the Minister did not reply. Today, on the fourth anniversary, Deminor published an open letter addressed to the Luxemboug authorities in the Financial Times.
For investors, it's still not too late to act. Deminor has initiated litigation on behalf of more than 2,500 investors in various jurisdictions. Until they have achieved a fair compensation, our clients will not rest.
Written on Dec 11, 2012 by