Madoff Trustee Sues HSBC for $9 Billion in US Court
The lawyer searching the globe to recover money for defrauded investors of convicted swindler Bernard Madoff sued HSBC for $9 billion on Sunday, accusing the bank of enabling the largest financial fraud in history.
Court-appointed trustee Irving Picard accused HSBC [HSBA.L 661.8 -4.00 (-0.6%)] of aiding the Madoff fraud "through the creation, marketing and support of an international network of a dozen feeder funds based in Europe, the Caribbean, and Central America," a statement by Picard said.
The lawsuit in U.S. Bankruptcy Court in New York also identifies "feeder funds", management companies and service providers of those funds. They include Sonja Kohn, Genevalor, Mario Benbassat and his sons, Albert and Stephane, Bank Medici and UniCredit.
HSBC spokesman Patrick McGuinness declined to comment. HSBC shares were up 0.7 percent in early Hong Kong trading on Monday, in a broader market [.HSI 23237.69 -82.83 (-0.36%)] that was up 0.9 percent.
Madoff, 72, is serving a 150-year prison sentence after pleading guilty in March 2009 to running a decades long investment fraud of up to $65 billion, an unprecedented scheme that shook investor confidence in market regulators. Thousands of investors, large and small, lost money worldwide.
Sunday's lawsuit seeks to recover at least $9 billion "based on theories of contribution to Madoff's scheme; aiding and abetting Madoff's fraud; unjust enrichment in the form of millions of dollars; and over $2.3 billion in fraudulent transfers," the trustee said.
The lawsuit contains 24 counts of alleged financial fraud and misconduct by HSBC.
It said that HSBC twice retained KPMG to identify concerns with the Madoff firm and KPMG twice reported serious risks already known to HSBC.
Red Flags
The trustee, appointed to recoup investor money lost to Madoff, on Thursday sued JPMorgan Chase & Co [JPM 39.61 0.30 (+0.76%) ] for $6.4 billion, accusing his primary banker of ignoring warning signs of his massive fraud. He had previously sued Swiss bank UBS [UBS 16.13 0.23 (+1.45%) ] for $2 billion.
Picard's complaint against HSBC and the other defendants also said they ignored red flags raised over the years about the legitimacy of Bernard L. Madoff Investment Securities in New York.
"Had HSBC and the defendants reacted appropriately to warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars, and countless victims sooner," Picard's statement said.
A Ponzi scheme is one in which early investors are paid with the money of new clients.
Picard has filed hundreds of lawsuits in the past week in addition to other lawsuits over the past year. The trustee must file such lawsuits to recover money by the two-year anniversary of Madoff's arrest and his firm's demise on Dec. 11, 2008.
So far, Picard's team says it has recovered $1.5 billion.
Many of Picard's lawsuits seek money from former Madoff clients he considers "net winners" for having withdrawn more from the firm than they invested.
The case is Picard v. HSBC et al, U.S. Bankruptcy Court, Southern District of New York, No. 09-01364 (amended).
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