HSBC is being sued for at least $9bn (£5.7bn) for allegedly aiding Bernard Madoff’s $65bn Ponzi scheme.
Irving Picard, the court-appointed trustee charged with liquidating Madoff’s investment firm and recovering funds for its victims, alleges 24 counts of financial fraud and misconduct against HSBC and its affiliates.
The lawsuit filed on Sunday claims HSBC helped establish an international network of “feeder” companies that diverted funds to Madoff’s investment advisory business.
This helped “fuel and extend Madoff's Ponzi scheme across international borders,” a statement from Picard’s office says.
He has named a series of defendants, including directors and managers in the funds’ management companies, accused of aiding and abetting the fraud. He alleges the defendants, who include Sonja Kohn, Genevalor, Mario Benbassat and his sons Albert and Stephane, Bank Medici and Unicredit, were “well aware” of signals that the deals were fraudulent.
“Had HSBC and the defendants reacted appropriately to such 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 said.
HSBC had both flagged concerns with and received warnings about Madoff’s investment practices from KPMG, its accountant, he said. The suit claims the institutions involved had the sophistication to understand the fraud and participated knowingly.
HSBC said it was “defending itself vigorously”against the claims. “HSBC believes that the US court-appointed trustees’ claims of wrong-doing are unfounded,” a spokesman said.
Picard has filed Madoff-related suits against several banks, including UBS and JP Morgan, to date.