HSBC settled the dispute with Kalix Fund Ltd., a spokesman said by e-mail 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 Plc (TIFHUQE), 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 euros ($1.3 billion) in assets lost after Madoff’s arrest. Kalix, the first case to reach trial, doesn’t stop others from pursuing claims with its settlement under Irish rules, according to a Kalix lawyer.
“This settlement may be a first step towards the resolution of those cases,” said Paul Kennedy, a Dublin lawyer at Dillon Eustace representing British Virgin Islands-registered Kalix, by e-mail. “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 in an e-mail. Kalix and HSBC didn’t 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 Kennedy. The settlement was reached the evening of Nov. 8, the day after the trial began, he said.
HSBC didn’t 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 on Nov. 7. 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 U.S. federal prison. The fallout of the fraud included the liquidation of four UCITS funds.
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