Hsbc sets aside 1.1 billion for legal fees in connection with Madoff scam
The bank lost an appeal in a lawsuit that has been going on since 2009, brought by the Herald Fund of Luxembourg
Key points
The long wave of the biggest financial fraud in US history is closely touching Europe's largest bank by capitalisation: Hsbc has announced that it has set aside USD 1.1 billion to meet the costs of a lawsuit related to the scam masterminded by Bernie Madoff, who died in prison in 2021.
The affair
Hsbc has in fact lost an appeal in a lawsuit that has been going on since 2009, brought by the Herald Fund of Luxembourg, now in liquidation, which is demanding the local branch of the British bank to return shares and cash worth $2.5 billion plus interest, or damages of $5.6 billion plus interest.
The Court of Cassation in Luxembourg on Friday rejected the appeal of Hsbc Securities Services Luxembourg against Herald. The fund argued that Hsbc's subsidiary was the custodian of funds, both securities and liquid assets, which Herald lost as a result of the fraud perpetrated by Madoff and that the bank should have been a better custodian of the assets entrusted to it.
The British bank stated that 'the financial impact, if any, could be significantly different' once the litigation concludes. Hsbc in fact intends to file a new appeal with the Luxembourg Court of Appeal and, even in the event of a defeat, is still prepared to challenge the size of the damages claimed by Herald.
This is not the only legal action that Hsbc has had to handle because of Madoff: in 2012, the bank had reached an out-of-court settlement with the Kalix fund, which had suffered heavy losses and had demanded damages of USD 35.6 million. The agreed figure had not been disclosed.
