Hedge funds and investors who lost money in the alleged $50bn Madoff scam have begun defending their decision to invest with Bernard Madoff, in some cases trying to shift the blame to US regulators.

Union Bancaire Privée, the Swiss bank that is one of the world’s biggest hedge fund investors, told clients in a letter this week that it had spotted potential dangers but had been reassured by Mr Madoff’s reputation and clean regulatory record.