FRANKFURT (Reuters) - Investors including U.S. hedge fund Elliott Associates have escalated a legal battle against members of Porsche's supervisory board by seeking 1.8 billion euros ($2.43 billion) in damages from Wolfgang Porsche and his cousin Ferdinand Piech.

The most recent lawsuit forms part of a legal campaign being waged by hedge funds in various courts across the world, seeking to recoup money which was lost by betting on a decline of Volkswagen's share price in 2008.

On Sunday, Porsche dismissed the most recent lawsuit, which was lodged at a Frankfurt regional court, as "unfounded". Ferdinand Piech and Wolfgang Porsche were not immediately available for comment.

A spokesman for Elliott Associates declined to comment.

"Porsche SE and its supervisory board members will defend themselves with all available legal means," Porsche said on Sunday, adding that the lawsuit in Frankfurt was no different to a separate lawsuit already pending in Hanover.

The funds have accused Porsche of engineering a "massive short squeeze" in October 2008 by quietly buying nearly all freely traded ordinary VW shares in a bid to take over the company, despite publicly stating it had no plans to do so.

Porsche's attempt to buy up much-larger rival VW ultimately failed, but hedge funds are still suing the Stuttgart-based company and its managers for alleged market manipulation. Porsche says the allegations are unfounded.

Piech and Porsche are both members of the clan which owns Porsche SE, and hedge funds argue that as supervisory board members, they were informed about moves to buy up a VW stake.

Piech was chief executive of VW before becoming chairman of its supervisory board.

In March 2008, Porsche SE dismissed as "speculation" talk that it intended to take over VW. Seven months later Porsche SE revealed it held 42.6 percent of VW's common shares as well as controlling another 31.5 percent via financial instruments.

When Porsche revealed it had amassed control of roughly three-quarters of the shares in Volkswagen Group, shares in the Wolfsburg-based carmaker soared to 1,005 euros, briefly making it the world's biggest company by market value.

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Hedge funds which had bet on a decline in the VW stock price made massive losses, prompting them to sue in various courts.

In December 2012, a New York judge dismissed a case brought by hedge funds including Glenhill Capital LP, David Einhorn's Greenlight Capital LP and Chase Coleman's Tiger Global LP, arguing the state was the wrong place to bring such a lawsuit, saying instead that the case was more appropriate for Germany.

Hedge funds have since pressed their case against Porsche's management and supervisory board in courts in Stuttgart, Braunschweig, Hanover and now in Frankfurt.

Porsche SE's attempts to buy VW backfired and pushed it to near-bankruptcy. Instead of buying VW, the company ended up selling its sports car business, Porsche AG, to VW.

German weekly magazine Der Spiegel was first to report that hedge funds are seeking damages from Ferdinand Piech and Wolfgang Porsche.

(Reporting by Edward Taylor Ilona Wissenbach and Jan Schwartz; Editing by Catherine Evans)