The Bank of Bermuda is among several offshore companies and individuals against whom a class action lawsuit has been filed on behalf of investors in four hedge funds who allegedly lost more than $3 billion in the Bernard Madoff fraud.

The bank's subsidiaries in the Cayman Islands and Luxembourg (Bank of Bermuda (Cayman) Ltd., described as the administrator and registrar of the Primeo Fund; Bank of Bermuda (Luxembourg) SA, described as the custodian of the Primeo Fund for a portion of the Class Period), along with two Cayman-domiciled hedge funds - Primeo Fund and Herald Fund; James E O'Neill, a former managing director of Bank Austria (Cayman Islands) (now UniCredit Bank); Cayman Islands resident Michael Wheaton, and British Virgin Islands-domiciled investment adviser BA Worldwide Fund Management Ltd. were all listed as defendants.

Also named as defendants were Ernst & Young, whose Cayman office allegedly audited one of the funds, and PricewaterhouseCoopers.

The complaint was filed at the US District Court for the Southern District of New York on March 19, 2009 by specimen plaintiffs Fabian Perrone, a resident of Argentina, and Chia-Hung Kao, a resident of Taiwan.

The action was filed on be The plaintiffs' claims against some or all defendants include negligent misrepresentation, breach of fiduciary duty, violation of general business law, gross negligence, unjust enrichment, and aiding and abetting breach of fiduciary duty, according to the complaint.

"This action arises from defendants' wrongful conduct in connection with the fraud and Ponzi scheme run by Bernard L Madoff through his investment firm Bernard L Madoff Investment Securities LLC," it read.

"Following these revelations, a number of investment funds disclosed that they were little more than feeder funds for Madoff and BMIS. Such funds included the Medici Funds. The Medici Funds each sought contributions directly from investors, and delivered, or fed, the investments they received to Madoff.

"Bank Medici AG, controlled the Medici Funds, and caused these funds to be fed into Madoff's Ponzi scheme. Sonja Kohn, the founder of Medici, its chairperson, and a 75 percent owner; Peter Scheithauer, the former chief executive officer of Medici; Werner Tripolt a former director of Medici; John Holliwell, another director of Medici; UniCredit SA, an Italian bank which owned 25 percent of Medici through its subsidiary Bank Austria Creditanstalt, Bank Austria itself (collectively the "Medici Defendants") were all control persons of Medici.

"The Medici Defendants, and Pioneer Alternative Investments (collectively the "Fund Managers"), who at all relevant times was owned by UniCredit and owned the Primeo Fund, represented to investors that their money would be invested in the securities market. The Fund Managers touted profits made by current investors, thereby encouraging investment by new and existing investors. However, the Fund Managers did not inform their investors that the Medici Funds were acting as feeder funds for a Ponzi scheme.

"Equally, defendants the Herald Fund Directors, Primeo Fund Directors, and Thema Fund Directors, along with the Medici Funds' advisers, administrators, managers and custodians, as defined infra, were control persons of their respective funds and misled investors by failing to inform them that they were investing in Madoff's Ponzi scheme through feeder funds.

"Defendant Ernst & Young was the auditor for the Herald and Primeo Funds and Defendant PricewaterhouseCoopers was the auditor for the Thema Fund (collectively the "Auditor Defendants"). The Auditor Defendants falsely represented to plaintiffs and the Class that their investments were secure and gaining value. The Auditor Defendants ignored or failed to do reasonable due diligence to uncover the many red flags which would have shown that these funds were not safe and growing, but were instead invested in a Ponzi scheme.

"Moreover, all the defendants ignored many red flags that should have caused them, as investment professionals, to conduct further due diligence and/or alter their investment decisions."