Madoff-Linked Funds Are Dissolved by Luxembourg Court

Madoff-Linked Funds Are Dissolved by Luxembourg Court

April 2 (Bloomberg) -- Luxembourg’s financial regulator won court approval to liquidate the LuxAlpha Sicav-American Selection and Herald (Lux) US Absolute Return funds, two investment vehicles tied to Bernard Madoff.

Judge Christiane Junck ordered the dissolution of the funds at a hearing today in Luxembourg, saying the liquidators will have the “widest possible powers” to recover money for investors. The requests to liquidate the funds were unopposed.

Luxembourg, Europe’s largest mutual-fund market, has been roiled since Madoff’s arrest on Dec. 11. At least 10 lawsuits by investors seeking repayments or documents from banks in charge of LuxAlpha have been handled by the Luxembourg courts.

“More funds will follow,” said Lex Thielen, a lawyer at Luxembourg law firm Thielen & Associes. “The liquidation of these funds is the best thing that can happen to protect the investors’ interests.”

LuxAlpha and Herald were among 17 funds and sub-funds forced to suspend customer redemptions after disclosures of losses from investments with Madoff. The regulator, the Commission de Surveillance du Secteur Financier, in February struck LuxAlpha and Herald Lux from its official funds list, saying it would seek their liquidation to “safeguard” investors’ rights.

Madoff, 70, is in jail after pleading guilty March 12 in Manhattan federal court to defrauding investors of as much as $65 billion. He faces a 150-year sentence for using money from new investors to pay off old ones in a global fraud that ran from at least the early 1990s. He will be sentenced on June 16.

Villehuchet Death

LuxAlpha once had $1.4 billion in assets and Herald Lux had $225.7 million in assets as of Oct. 31. Thierry Magon de La Villehuchet, chief executive officer of Access International LLC, which managed LuxAlpha, was found dead in his New York office after news of Madoff’s alleged fraud emerged.

The commission on March 3 struck Luxembourg Investment Fund-U.S. Equity Plus, a third fund directly affected by Madoff’s fraud, off its official list and said it would seek its judicial liquidation.

Luxembourg, the world’s largest mutual fund market after the U.S., has some 3,370 registered funds holding assets of about 1.56 trillion euros ($2 trillion), which is 30 percent of the 5.2 trillion euros in Europe’s funds.

Earlier this week, there was a hearing in the first Luxembourg case seeking documents from Herald Lux and HSBC Holdings Plc’s local unit, the fund’s custodian bank, that could form the basis for future lawsuits over losses related to Madoff. The Luxembourg court in a similar case on March 5 ordered UBS AG, custodian for LuxAlpha, released documents to lawyers for investors.

BLOOMBERG