UBS has been accused of "seriously neglecting" its supervisory duties after one of its funds invested 95 per cent of its assets with Bernie Madoff's Ponzi scheme.

Investors in Luxembourg have taken the bank and its partner in the fund, Ernst & Young, to court over their handling of the LuxAlpha Sicav-American Selection fund.

If the case against UBS and Ernst & Young is successful, they may face hundreds more similar claims from investors, reports Bloomberg.

Court hearings started today after a Luxembourg court decided earlier this year to use a small selection of the hundred or so claims as test cases.

At the time of Madoff's arrest, the LuxAlpha fund contained around $1.4 million in net assets.

Madoff is currently serving a 150-year jail sentence for masterminding a global multi-billion dollar fraud.

Earlier this month, an auction of the fraudster's belongings fetched almost $1 million.

Items sold by US Marshals included 17 Rolex watches, 30 designer handbags and a number of golf clubs.

By Tony Aynsley

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