The Madoff scandal stirred confusion at the heart of the French establishment yesterday as the Financial Markets Authority (AMF) was forced to retract a claim that no ordinary savers would be caught in the fraud allegedly perpetrated by the Wall Street trader.

After a day of contradictions, the AMF admitted that about 8 per cent of French mutual funds exposed to the Madoff fraud were sold to the public at large. The admission will fuel fears that ordinary investors in France – and in other countries, as well – could join bankers and billionaires on the list of Madoff’s victims.

About 100 French funds managed by 30 or so companies face potential losses of €500 million after investing indirectly with the trader through funds in the Irish Republic and Luxembourg, according to the AMF.

Amid concern of a panic, Jean-Pierre Jouyet, who stepped down as European Affairs Minister in the French Government to take over as chairman of the AMF this week, initially sought to dismiss fears that small investors could be hit. “This only involves well-informed investors, professionals who generally have a big fortune,” Mr Jouyet said. “There are no general public funds involved and no funds where there are small savers.”

His words of comfort were echoed by Christine Lagarde, the Finance Minister, who said: “Our responsibility today is mainly not to frighten savers because there are no general public mutual funds involved.”

However, her claim proved to be misleading. In a statement, the AMF said 66 per cent of the French funds with Madoff exposure were sold to wealthy investors, 26 per cent to institutional investors and 8 per cent – about €40 million – to the public at large.

Gérard Rameix, secretary-general of the AMF, described the €500 million exposed as “obviously very big and dramatic for the people who are directly threatened”.

Serge Maître, secretary-general of the French Association of Bank Users, said small investors were right to be concerned. “The first thing you should do is to worry,” he said. “The second is to write a letter asking your investment manager to confirm that there is no Madoff in your fund. It’s very difficult for customers to know whether there is any Madoff in there.”

UBP, a private Swiss bank, owned up to Madoff exposure, saying that it faced potential losses of $700 million (£465 million) in the alleged fraud.

Christophe Bernard, the head of asset management for UBP, said: “The exposure of the accounts under our discretionary management mandate and our funds of alternative funds is $700 million. The financial solidity of the bank is not affected and remains top flight.”

Among other banks known to be involved are Banco Santander, of Spain, which has exposure of €2.3 billion, the Dutch arm of Fortis, with exposure of up to €1 billion, HSBC, whose exposure is about $1 billion, and Royal Bank of Scotland, which faces potential losses of £400 million.

However, Fairfield Greenwich Group, the New York asset manager, is the biggest loser to date, with exposure of about $7.5 billion.

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