Madoff scandal Deutsche Bank was approached dozens of times in the past two years to lend to hedge fund investors who wanted to funnel money to Bernard Madoff, but repeatedly turned down the opportunities because the money manager did not pass the bank’s due diligence criteria.
The approaches came from all over the world, from investors who were accessing Mr Madoff’s funds through a wide variety of feeder funds, and continued into the last quarter, according to sources.
The requests for leverage shared common threads, including refusals to allow any contact with the money manager and references to “split strike” strategy – how Mr Madoff described his investing methods.
Deutsche Bank declined to comment, except to say that it had no material exposure to Mr Madoff.
Banks and regulators all over Europe are still coming to grips with the arrest of Mr Madoff, who was charged by US prosecutors last month with running a $50bn fraud.
Leading banks from Britain, France and Japan have admitted lending billions of dollars to funds to gear up their investments with Mr Madoff, while others created special “notes” to help investors, providing a guarantee.
The banks include HSBC, Royal Bank of Scotland, Nomura, Natixis, BNP Paribas, BBVA and the Dutch arm of Fortis.
It on Wednesday emerged French prosecutors have launched a preliminary inquiry into whether local investors in Madoff funds had been the victims of a crime.
Paris prosecutors will decide whether to launch a formal investigation into the the way Mr Madoff and his associates handled funds belonging to French investors.
The AMF, France’s stock market authority, estimates that French investors lost some €500m to the Madoff fraud. The regulator is looking closely at whether those who marketed these funds to investors were aware of any irregularities in the Madoff investment vehicles.
In Austria, Bank Medici, the small bank that was taken over by the government after revealing that it had $2.1bn invested with Mr Madoff, on Wednesday denied reports that its founder had gone into hiding for fear of retribution from angry clients.
The bank said Sonja Kohn, its 60-year-old majority owner, remained in Vienna and was working closely with Gerhard Altenberger, the commissioner appointed last week by the government.
Bank Medici also denied a New York Times report that Russian oligarchs were among the bank’s “displeased investors”, saying there were no Russians or Ukrainians among the investors in funds it managed.
It added that Mrs Kohn continues to chair its supervisory board and is working with other responsible parties to map out a future.
Between 70 per cent and 80 per cent of the bank’s revenues derived from income related to its fund business, the bulk of which was connected to Mr Madoff.
