By Douwe Miedema

LONDON (Reuters) - Fraud-busters set about scrutinising Bernard Madoff's UK business on Thursday, and European investors readied lawsuits, as U.S. prosecutors laid out new grounds for revoking the suspected fraudster's bail.

Investor activist group Deminor said it would file a legal complaint against UBS, HSBC, Hyposwiss and others, saying they had neglected clients exposed to the alleged fraud, which could be as big as $50 billion (32 billion pounds).

Wall Street financier Madoff is under house arrest in his luxury Manhattan apartment after his arrest last month, charged with running a huge investment scam. Banks have revealed tens of billions of dollars worth of damage from the scandal.

Separately, company accounts and filings obtained by Reuters showed the 70 year old moved nearly $160 million of his own assets to his British-based firm in 2007, via the allotment of new shares in the UK unit.

The Serious Fraud Office said it had begun investigating Madoff's British operation after it was given an interim report by Grant Thornton, provisional liquidators of the unit in Mayfair, London's hedge fund hotspot.

It was not immediately clear whether the watchdog's investigation was related to the money transfers.

In New York, a search of Madoff's office desk revealed he had signed cheques totalling more than $173 million ready to be sent, U.S. prosecutors said, urging a judge to jail him.

A decision on Madoff's bail was expected by Friday or Monday, a clerk at the judge's chambers said.