Did HSBC Help Madoff?

Irving Picard, the bankruptcy trustee in the Bernard Madoff case.

(Reuters) – The lawyer searching the globe to recover money for defrauded investors of convicted swindler Bernard Madoff sued HSBC for $9 billion on Sunday, accusing the bank of enabling the largest financial fraud in history.Court-appointed trustee Irving Picard accused HSBC of aiding the Madoff fraud “through the creation, marketing and support of an international network of a dozen feeder funds based in Europe, the Caribbean, and Central America,” a statement by Picard said. The lawsuit in U.S. Bankruptcy Court in New York also identifies “feeder funds,” management companies and service providers of those funds. They include Sonja Kohn, Genevalor, Mario Benbassat and his sons, Albert and Stephane, Bank Medici and UniCredit.

HSBC spokesman Patrick McGuinness declined to comment. HSBC shares were up 0.7 percent in early Hong Kong trading on Monday, in a broader market that was up 0.9 percent.

Madoff, 72, is serving a 150-year prison sentence after pleading guilty in March 2009 to running a decades long investment fraud of up to $65 billion, an unprecedented scheme that shook investor confidence in market regulators. Thousands of investors, large and small, lost money worldwide. the trustee said.

Sunday’s lawsuit seeks to recover at least $9 billion “based on theories of contribution to Madoff’s scheme; aiding and abetting Madoff’s fraud; unjust enrichment in the form of millions of dollars; and over $2.3 billion in fraudulent transfers,”

The lawsuit contains 24 counts of alleged financial fraud and misconduct by HSBC. It said that HSBC twice retained KPMG to identify concerns with the Madoff firm and KPMG twice reported serious risks already known to HSBC.

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Can anyone possibly imagine what would happen if Picard were to win the case? Is it possible that our banks, the supposed safeguards of our money and rights, are responsible for the biggest investment fraud in history? It’s hard to point fingers here, since everyone is guilty of the same greed: whether it was HSBC turning a blind eye or Madoff embezzling millions.  Are HSBC and Madoff’s actions basic human nature… or are they unintended consequences of capitalism?

Also see HSBC Doubles Salaries to Beat Clampdown on Big Bonuses, Did the SEC Watch Porn When Wall Street Crashed? and Did Denial Cause the Lehman Brothers Collapse?

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