HSBC has vowed to fight a $250m (£151m) US lawsuit that alleges the bank aided fraud through its role in the collapse of Keydata.
The Financial Times reports HSBC’s US subsidiary is accused of failing to spot a series of red flags in the run-up to the liquidation of SLS Capital, a Luxembourg-domiciled vehicle that issued bonds that Keydata investors bought.
HSBC says it will respond formally to the allegations by filing a motion to dismiss the complaint, which was filed in a New York court on Friday by SLS’s liquidator. The bank declined to comment on the allegations further.
The complaint was backed by a group of 900 Keydata investors, known as KSLIT, who lost money when the investment firm collapsed in 2009.
HSBC is accused of playing “a critical role in the eventual demise of SLS” and “failing to prevent” a fire sale of SLS’s portfolio, which specialised in dealing in life insurance policies in the secondary market.
While the bank did not sell or market the bonds, SLS’s complaint states that HSBC was the custodian of the life policies that underpinned the bonds.
The complaint alleges the bank did little to correct misleading marketing material that held out the bank as the bonds’ trustee, and that it did not properly investigate claims that Keydata was an alleged Ponzi scheme.
KSLIT spokesman Tony Lahert says: “Many pensioners who lost money in the SLS fraud have told me they only invested because they saw the ‘respected’ HSBC brand stated as US trustee on the marketing literature in 2005, hence feeling secure to invest in the SLS bond. So it is particularly satisfying to get HSBC into a court of law.”
Last month, the Financial Times reported the liquidator of SLS Capital had started legal proceedings against US brokerage CRT Capital in a $100m claim for its role in the collapse of Keydata.
And earlier this month Keydata founder Stewart Ford initiated a £371m legal claim for loss and damages against the FCA which alleges the regulator’s investigation into Keydata was an “abuse of power”.