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Madoff trustee sues UBS for $2 billion

By Aaron Smith, staff writer

NEW YORK (CNNMoney.com) -- The court-appointed trustee for the recovery of assets stolen by Bernard Madoff has sued UBS AG for $2 billion, accusing the Swiss financial firm of participating in Madoff's Ponzi scheme.

Trustee Irving Picard filed the suit in U.S. Bankruptcy Court in Manhattan, alleging 23 counts of financial fraud and misconduct against UBS (UBS) for collaborating in Madoff's scheme. The trustee seeks "at least $2 billion for equitable distribution to [Madoff] victims with valid claims."

"UBS actively assisted the Madoff Ponzi scheme by, among other things, serving as the sponsor, custodian and administrator of various affiliated feeder funds, including Luxalpha SICAV and Groupement Financier Ltd.," read the trustee's complaint. "As administrator of these funds, UBS allowed Madoff to be the only source of information for valuing the funds."

David Sheehan, counsel for the trustee, said that without UBS' involvement, Madoff's firm "would have been deprived of more than a billion dollars in investments and Madoff's fraud would have been diminished in both scope and duration."

As of Nov. 19, in the most recent tally available, the trustee had approved a total of 2,305 claims from victims, totaling nearly $5.8 billion in damages.

UBS did not immediately comment on the case.

Madoff, 72, pleaded guilty in March, 2009 to 11 counts related to running the most massive Ponzi scheme in history and was sentenced to 150 years. He is incarcerated at a medium security federal prison in Butner, N.C., and his release date is Nov. 14, 2139.

Madoff operated his scam in the classic Ponzi style while using his investment firm as a front. He claimed to be investing his clients' money. He kept the fraud going by using deposits from new clients to provide so-called returns to more mature clients. But in reality, he was stealing the money and there were no returns. To top of page

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