According to a US lawsuit launched against HSBC, the bank continued to act for funds that fed money into Bernard Madoff??s Ponzi scheme in spite of repeated warning from the bank??s own executives and outside auditors about the ??baffling? and potentially fraudulent structure of the fund.In the $9bn claim against HSBC and other European institutions, the trustee charged with recovering money for Mr Madoff??s victims alleged the warnings began as early as 2001, seven years before the scheme collapsed, revealing one of the biggest frauds in history.
The HSBC complaint was made public on Monday as Irving Picard, the trustee, announced his largest settlement to date with a bank-sponsored feeder fund that sent money to Mr Madoff.
The lawsuit alleges that Mr Madoff sent HSBC-connected funds account statements that included extraordinary discrepancies, yet the bank??s subsidiaries continued to serve as administrators, custodians and marketers for feeder funds that sent money to the $65bn scheme.
Among other things, the statements included claims that Mr Madoff was parking investors?? cash in a money-market fund that ceased to exist in 2005, that trades had settled on non-working days, and at prices outside the reported daily range.
The lawsuit filed in New York seeks $6.6bn from HSBC subsidiaries and demands more than $2bn from UniCredit??s Bank Austria and Bank Medici and a series of feeder funds and individual executives.
One-third of the money that went to the scheme came through HSBC-related funds, the complaint said.
??The fees they received for their various roles were nothing more than kickbacks paid for looking the other way,? it alleges.
HSBC said it ??believes that the US court-appointed trustees?? claims of wrongdoing are unfounded and it will defend itself vigorously against these claims?. The bank is already fighting investor lawsuits in the US, France and Ireland.
Meanwhile Union Bancaire Privée, the Swiss private bank, had agreed to pay up to $500m into a restitution fund for Mr Madoff??s victims. The US bankruptcy court is due to consider the deal on Thursday.
