Investments with alleged US fraudster Bernard Madoff have forced 17 Luxembourg funds and sub-funds to suspend redemptions, the country’s financial regulator said, according to Bloomberg.

The funds include Access International Advisors’ LuxAlpha Sicav-American Selection, the Herald (Lux) US Absolute Return Fund, the Luxembourg Investment Fund-US Equity Plus, and investments in those vehicles such as six sub-funds of the BG Umbrella Fund, the Commission de Surveillance du Secteur Financier said.

The alleged Ponzi scheme of Mr Madoff, a Wall Street money manager, has hit dozens of banks, hedge fund firms, investment houses and other financial institutions around the world. The scandal has ignited fresh debate on the need for investors in vehicles such as hedge funds to use independent administrators and carry out meticulous checks.

The number of Luxembourg funds involved and questions over safeguards for investors have bankers concerned it may hurt their ability to attract placements from investors worldwide. Luxembourg, a country with fewer than 500,000 people, is the world’s second- largest mutual fund market after the US.

The Luxembourg Fund Industry Association said 16 funds had suspended redemptions. Charles Muller, the association’s deputy director-general, said in an interview the regulator used more recent data than his group.

The funds at issue are mostly Undertakings for Collective Investment in Transferable Securities, or UCITS, which burgeoned in Luxembourg after it was the first nation to implement a set of harmonized rules passed by the European Union in 1985.

Almost 3,400 registered Luxembourg funds hold assets of more than €1.6 trillion ($2 trillion).