HSBC bank has settled a legal case over millions in losses by a fund that invested with jailed financier Bernard Madoff, ending what would have been a six-week trial in Dublin just a day after it started.
HSBC settled the dispute with Kalix Fund Limited, a spokesman said today, without disclosing the terms. Kalix sought $35.6 million from the bank, which it said was responsible for safeguarding the money it placed in Thema International Fund, which invested with Madoff.
HSBC, Europe's largest lender by market value, was custodian to Thema and faces more than 50 complaints in Ireland - including from Thema itself - for allegedly failing in its duties to the fund and its investors.
Thema is seeking about €1 billion in assets lost after Madoff's arrest. Kalix, the first case to reach trial, does not stop others from pursuing claims with its settlement under Irish regulations, according to lawyers.
"This settlement may be a first step towards the resolution of those cases," said Paul Kennedy of legal firm Dillon Eustace representing British Virgin Islands-registered Kalix.
"It will be up to the parties as to how all of that litigation proceeds."
HSBC reached "an amicable settlement" with Kalix, spokesman Jezz Farr said. Kalix and HSBC did not give details on their agreement. Thema was a European-regulated fund, known as Undertakings for Collective Investment in Transferable Securities, or UCITS. Custodians are responsible for managing deposits and payments.
The trial was the first of its type anywhere involving a UCITS fund to get this far, said Mr Kennedy. The settlement was reached the evening of November 8th, the day after the trial began, he said.
HSBC did not act in time to protect investors' money from fraud, though it knew of risks posed by Madoff, John O'Donnell, a lawyer for Kalix told Judge Peter Charleton when the trial opened last week.
The London-based bank handed its custodian duties to Madoff, then tried to conceal it, Kalix argued. Madoff (74) pleaded guilty in 2009 to orchestrating what prosecutors called the biggest ponzi scheme in history and is serving a 150-year sentence in US federal prison.
The fallout of the fraud included the liquidation of four UCITS funds.
Bloomberg
