Case against HSBC’s Irish arm over Madoff ponzi scheme may take four months

Fund is claiming €284m against HSBC for alleged negligence and breach of contract


A claim against the Irish arm of HSBC bank for $333 million (€284 million) related to the Ponzi scheme run by jailed US fraudster Bernie Madoff is expected to take four months to hear, a High Court judge has said.

Mr Justice Twomey made the comment during a ruling on discovery issues. He said the ruling will help reduce court time and, although the possibility was remote, may even facilitate settlement of the dispute prior to the trial.

“It is this court’s view that due to the shortage of judges in Ireland there is a need for judges to use court resources efficiently”, he said.

His ruling concerns a case taken by Defender Ltd, a British Virgin Islands (BVI) registered investment fund, against HSBC Institutional Trust Services Ireland Ltd, with registered officers at Grand Canal Square, Dublin.

Defender is claiming $333 million against HSBC for alleged negligence and breach of contract regarding HSBC’s alleged role as a custodian of funds, which were lost as a result of fraud by its alleged sub-custodian Bernie L Madoff Securities LLC.

The judge said that company was operated by the “notorious” Mr Madoff who was involved in a €65 billion Ponzi scheme in the US, allegedly the biggest fraud in history.

HSBC joined Reliance Management BVI Ltd and Reliance International Reseach LLC as third parties in the case.

HSBC alleges those two companies are a single group entity and, as Defender’s investment manager, had full knowledge of all the risks associated with funds being entrusted to the Madoff company.

In this regard, HSBC had received 53,000 documents from Reliance as part of the pre-trial discovery process.

However, HSBC applied to the court in relation to Defender’s failure to reply to around 650 questions under the pre-trial system known as “interrogatories”, a device used, usually by defendants, to learn facts forming the basis for the claim against them.

Defender opposed the application, arguing many of the interrogatories sought by HSBC were flawed.

Mr Justice Twomey said the court sustained two out of seven objections made by Defender and will hear from the parties later this month on the precise terms of any order to be made.

The main case is due to start in October.