UBS tricked Madoff victims with prospectus: lawyer

PARIS (Reuters) - Swiss bank UBS "tricked" victims of Bernard Madoff's giant Ponzi scheme by sponsoring a Luxembourg-registered fund that for four years fed assets directly to the fraudster without saying so in its prospectus, a Paris court heard on Wednesday.

The "Luxalpha" fund was deemed safe by investors because of the link to UBS, which was presented in the prospectus as sole custodian of the assets, said Jean-Pierre Martel, a lawyer representing 78 French investors who invested 28 million euros ($39.69 million) in total in Luxalpha.

UBS denies the charge.

"The prospectus was saying: 'this product is 100 percent UBS, you can go for it'," Martel told a hearing at the Paris Court of Commerce.

"Here we have investors who were shamefully cheated by one bank ... with information that was wrong and dishonest."

A verdict date has been set for June 9.

UBS is also fighting a $2 billion lawsuit from the trustee liquidating Madoff's companies, Irving Picard, over its involvement in Luxalpha.

Picard has said UBS' involvement lent the funds "an aura of legitimacy" while shielding the bank from liability through secret side agreements.

"UBS considers it has not committed any error. It is also a victim in this affair," the Swiss bank's lawyer, Denis Chemla, told Reuters during recess.

Lawyer Martel told Reuters that if the Paris court decided it was not competent to judge the matter then it would be "over," as his clients were not recognized as creditors or shareholders by the Luxembourg authorities.

(Reporting by Lionel Laurent and Matthieu Protard; editing by Elaine Hardcastle)