HSBC will pay $62m to Thema fund investors, a fund which fed money to Bernard Madoff, making it the first custodian bank to settle a class action lawsuit involved in the Madoff scandal.
The settlement is equivalent to 20 cents on the dollar for the fund’s $312m in real losses in the Ponzi scheme but HSBC has not admitted liability.
The agreement represents just a small amount of HSBC’s total exposure to the Madoff scandal. When Madoff was arrested in December 2008, HSBC was custodian or administrator for a number of funds incurring real losses of around $4.3bn.
HSBC is currently involved with a number of claims connected to Madoff including a $9bn claim from Irving Picard, the US trustee responsible for recovering money for Madoff’s victims.
The Financial Times says the Thema settlement would enable HSBC to avoid protracted litigation as Thema investors have agreed to seek to dismiss Picard claims on their behalf.
HSBC says it continues to believe it has “good defences against the Madoff-related claims that have been brought against it and will continue to defend the other Madoff-related proceeding vigorously”.