HSBC Holdings Plc (HBC) has agreed to settle a law suit filed against the company by the investors of Ireland-based Thema International Fund that had invested in Bernard L. Madoff Securities.
In the settlement agreement announced on Tuesday, HSBC stated that it would pay $62.5 million to the Thema investors for class-action claims brought against the company on the grounds of its failure to spot fraudulence in Mr. Madoff’s Ponzi scheme.
The plaintiffs had accused HSBC of its failure to conduct proper due diligence on the Madoff Securities hedge fund, to which HSBC acted as a custodian and provided administrative services. The claimants also alleged that the company could not detect the warning signs and breached its duty towards the funds and the investors.
HSBC further commented that though Thema had assets worth $1.1 billion as of November 2008, the real value of the fund was $312 million. Hence, the company is actually paying 20% of the real value of the fund as a part of the settlement deal. In 2009, Mr. Madoff pleaded guilty to running a Ponzi scheme and is currently serving a 150-year prison sentence.
However, HSBC neither admitted nor denied any of the charges bought against it. In fact, the company further argued that since it was not aware of any scam in Madoff fund, it suffered a loss of $1 billion by investing in the Ponzi scheme.
Along with HSBC, some of the large U.S. banks, including JPMorgan Chase & Co. (JPM) and Citigroup Inc (C), are also facing law suits filed by Irving H. Picard, the trustee liquidating Madoff Securities.
HSBC currently retains a Zacks # 5 Rank, which translates into a short-term Strong Sell rating.
CITIGROUP INC (C): Free Stock Analysis Report
HSBC HOLDINGS (HBC): Free Stock Analysis Report
Be the first to comment