A Luxembourg court has ruled that UBS does not have to return €3.2million ($4 million) to two French firms which invested in a Madoff-related fund for which the Swiss bank was custodian, according to a Bloomberg report. 

KBL Richelieu Private Banking, along with insurer La Mondiale, had invested around $4 million in the LuxAlpha Sicav-American Selection fund.  The fund, of which UBS’s Luxembourg unit was the custodian bank, was invested with products linked with alleged fraudster Bernard Madoff.

During the hearing, the French investors’ representatives said that they had made a redemption request to the fund on 14 November, nearly a month before Mr Madoff's arrest on 11 December, but had not received proceeds of the sale.

UBS’s representatives argued that clarification from Luxembourg’s financial regulator was needed before disbursements to investors could proceed.

The court’s decision not to uphold KBL’s claims contradicts an earlier court ruling in a similar case against UBS.

In January, French asset manager Oddo & Cie took legal action against UBS as the custodian bank of the LuxAlpha American Selection Fund. 

The court heard that Oddo sold clients’ shares in the fund in November, but did not receive the proceeds. UBS argued it could not pay out any money after Mr Madoff’s arrest because all investors had to be treated equally.

In this case, the court said UBS’s reasoning was “manifestly unjustifiable” and ordered the bank pay Oddo  €30 million on 16 January, with a  €3 million fine for every day it delayed. The bank complied on the date appointed.