LONDON (IT BOLTWISE) – HSBC bank is once again facing the aftermath of the Madoff fraud. One of its subsidiaries has been sued by Herald Fund SPC to recover securities and cash related to Bernard Madoff’s infamous Ponzi scheme. The Luxembourg Court of Cassation has partially dismissed the HSBC subsidiary’s appeal, prompting the bank to consider further legal action.
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HSBC bank, one of the world’s largest financial institutions, is once again in the spotlight due to its links to the infamous Madoff fraud. A subsidiary of the bank has been sued by Herald Fund SPC to recover securities and cash tied to Bernard Madoff’s multibillion-dollar Ponzi scheme. The Luxembourg Court of Cassation recently dismissed the HSBC subsidiary’s appeal against the return of securities, while accepting the demand for the return of cash.
Bernard Madoff, once a respected name on Wall Street and former chairman of the Nasdaq Stock Exchange, confessed in 2008 that his investment business was a giant Ponzi scheme. He had not invested his customers’ money, but had diverted it to his company’s bank accounts and created fake profit statements. A court-appointed trustee estimates that Madoff embezzled a total of $17 billion in client funds.
HSBC was embroiled in numerous legal disputes in the years following the scandal as various subsidiaries provided custody and administration services to funds whose assets were invested with Madoff. Herald Fund SPC’s current lawsuit is just another chapter in the long line of legal challenges facing the bank.
The bank has announced that it will lodge a second appeal before the Luxembourg Court of Appeal. If this is not successful, HSBC plans to challenge the amounts to be paid in a later procedure. Given the complexity of the case and the pending appeal, the financial impact could vary significantly. HSBC will report its third-quarter results on Tuesday, which could provide further insight into the financial impact of the case.
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