Madoff scandal hits European banks and investment firms.

Crime: For some it could be worse than the housing collapse.

Two months after being hammered by the collapse of Lehman Brothers, banks and investment funds in Europe are trembling in the face of the massive fraud allegedly perpetrated by New York broker Bernard Madoff. Private European banks and investors specialised in the placement of high-risk hedge funds could have exposure of up to several billion dollars in the scandal. Madoff was arrested on Thursday for allegedly defrauding his customers through a giant pyramid scheme, with prosecutors alleging that the 70-year-old, a decades-long veteran of Wall Street, confessed to losing at least 50 billion dollars in the so-called Ponzi scheme. Madoff's company, Bernard L. Madoff Investment Securities LLC, attracted "the world's financial aristocracy," said the Spanish newspaper El Pais. Among his clients were international banks as well as discreet private banks and companies involved in managing the fortunes of a single wealthy family. Swiss bankers face losses of up to five billion dollars (3.7 billion euros), Geneva's Le Temps newspaper said. It said that Union Bancaire Privee, a major asset management institution specialising in hedge funds, could be exposed to the tune of one billion dollars.