The Brazilian group has consistently denied its exposure, but the sources told the paper that Safra representatives from the US and Europe marketed an affected fund, Zeus Partners, to Latin American investors.

The bank declined to comment on the matter to WealthBriefing

The Zeus fund is a British Virgin Islands company controlled by SIAM Capital Management of Bermuda. The custodial bank is the Gibraltese arm of Banco Safra.

The report's sources are quoted as saying Safra representatives from the US and Europe had been in Latin America for at least the past three weeks making verbal offers to investors in the Zeus fund. They said the representatives were offering clients the value of their initial investment in perpetual bonds paying interest of 2 per cent a year, and the offer was therefore worth about 30 per cent of the value of initial investments.

A lawyer representing a number of Zeus investors told the FT they were “not happy, to put it mildly”.

The Safra offer is reportedly similar to an offer made by Banco Santander earlier this year, also involving compensation through preferred shares paying interest of 2 per cent a year. The Spanish bank confirmed to WealthBriefing that 70 per cent of clients affected worldwide have accepted its offer so far. However, Zeus investors are quoted as saying that the Safra offer was being made verbally, so the precise details of the offer are hard to evaluate.

The Safra Group sold a number of Madoff “feeder” funds, such as Fairfield Sentry and Kingate Global, which clearly stated they would allocate assets to Bernard Madoff Investment Securities. The FT’s sources said many investors only found out Zeus was investing in Madoff funds after Mr Madoff’s arrest in December.