Investors are to launch legal proceedings in France this month against banks, including HSBC and UBS, for allegedly helping to channel their money into Bernard Madoff’s $50 billion fraud, lawyers said yesterday. The moves come after lawsuits in Luxembourg and the threat of legal action in Switzerland in connection with the alleged Ponzi, or pyramid, scheme run by the New York money manager.

Officials in Paris said that French mutual funds had lost about €500 million (£454 million). Most were reserved for wealthy clients, but general public funds incurred losses of about €40 million, according to France’s Financial Markets Authority.

Nicolas Lecoq-Vallon, whose law firm represents about 20 clients with investments in Madoff products of more than €100 million, told The Times that he would file lawsuits against HSBC, UBS and French asset management companies this month.

Other French lawyers are also drawing up lawsuits in connection with the scandal, whilst Deminor, which specialises in advising shareholders, said that it was taking action on behalf of institutional and private investors.

All placed money in European funds – notably Luxalpha American Selection and Luxinvest, both based in Luxembourg, and Thema, of Ireland – which invested with Madoff.

UBS, of Switzerland, was the custodian of the Luxalpha and Luxinvest funds, which had assets of more than €2 billion. HSBC was the custodian for Thema, which invested $1.1 billion (£756 million) with Mr Madoff.

Mr Lecoq-Vallon claimed that banks and other intermediaries had “failed in their duty to exercise control and vigilance” in connection with the feeder funds. Nor had they fulfilled an obligation to “check on the solvability and security” of Mr Madoff when selling life insurance contracts.

Fabrice Rémon, managing director of Deminor, said that he represented 40 investors “and the number is growing all the time as people realise they are affected by Madoff. We have people who lost €15,000 and people who lost €1 million. So it is wrong to say this only concerns the wealthy.” He said that he had engaged lawyers to begin proceedings against UBS and HSBC in Ireland and Luxembourg and was considering action against other banks in connection with four more feeder funds, which he declined to name. “Manifestly, the banks did not exercise a minimum of due diligence. If they had done so, they would have stopped the fraud straight away,” he said.

UBS says that it never encouraged customers to place money in Madoff-linked feeder funds. HSBC says that its arrangements with Thema are not “a source of exposure to the group”.

Meanwhile, a court hearing has been scheduled for today on a US government appeal of a judge’s ruling keeping Mr Madoff on bail and under house arrest. Monday’s ruling gave Mr Madoff more time in his $7 million Manhattan penthouse apartment before he goes to trial or pleads guilty. The Government wants a judge to revoke his bail and send him to jail.

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