UBS faces a forgery probe at its Luxembourg unit over how it oversaw funds connected with US Ponzi conman Bernard Madoff, news reports said.

Luxembourg police said they are conducting a preliminary investigation into the bank, which could result in it facing criminal charges.

"There is a preliminary investigation for forgery against UBS Luxembourg," a spokesperson for the country's prosecutor was quoted as saying. "If they find conclusive evidence it is very likely that there will be a court case,” the spokesperson continued.

Later, a spokesperson told WealthBriefing: "Neither UBS (Luxembourg) SA nor its employees are subject to any Luxembourg criminal investigation over funds with Madoff-positions. We are aware that people (including current UBS employees) will be invited to testify in a preliminary investigation over such dunds.
Luxalpha and Luxembourg Investment Fund were created at the explicit request of wealthy clients who requested a tailor-made fund to enable them to continue to investing their assets with Madoff."

"The fund documentation made it clear that UBS (Luxembourg) SA was not expected to be responsible for the safekeeping of the assets. The fund documentation contained an explicit waiver to that effect. The investors and involved authorities were well aware of the Madoff involvement in these funds," UBS said.

The investigation is a blow to UBS, which in early March this year scored an important victory after a Luxembourg court ruling that potentially nullified hundreds of claims by investors who lost money in funds affected by the Bernard Madoff fraud. That ruling was also a victory for the accountancy firm, Ernst & Young, which was involved in the case.

UBS was the custodian for the LuxAlpha and LuxInvest funds, which lost around $2 billion to Madoff.

UBS reportedly said in a statement neither its Luxembourg unit nor its employees were subject to any Luxembourg criminal investigation over funds invested with Madoff.