NEW YORK—The court-appointed trustee for Bernard L. Madoff’s estate has sued three major global financial institutions for a combined $17.4 billion, alleging that the banks aided Madoff in his Ponzi scheme.
Madoff, former investment advisor and chairman of the Nasdaq Stock Exchange, in March 2009 pleaded guilty to a massive fraud involving his investment management business, bilking investors out of more than $50 billion dollars.
He is currently in prison serving a sentence of 150 years, after his Ponzi scheme involving Bernard L. Madoff Investment Securities LLC was publicized in December 2008.
According to a statement by Irving H. Picard, the lawsuit—filed in the U.S. Bankruptcy Court in Manhattan—alleged that the bank and its affiliates aided the conman in defrauding his investors.
The complaint accused HSBC of creating and marketing an international network of feeder hedge funds based in multiple jurisdictions that fed money to Madoff’s investment firm, up to $9 billion. Picard said that HSBC should have known about Madoff’s fraudulent behavior, as one of HSBC’s consultants, KPMG, raised concerns regarding Madoff’s business ventures.
“Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars, and countless victims sooner,” Picard said in a statement.
According to a statement by Picard, “The complaint seeks to recover nearly $1 billion in fees and profits and an additional $5.4 billion in damages for [Morgan’s] decades-long role as [Madoff’s] primary banker, aiding and abetting Madoff’s fraud.”
On Nov. 24, the trustee sought to recover $2 billion from UBS. Its allegations were similar to those levied against HSBC, namely creating feeder funds to funnel cash into Madoff’s investment firm.
Picard also accused the firms of knowingly disregarding indicators of fraud.
But analysts say that proving knowledge of fraud is difficult—there’s a difference of condoning fraudulent acts and actively finding it. Even the Securities and Exchange Commission failed to act on reining in Madoff, despite alerts of fraud from multiple sources.
According to Picard, such profits were considered to be “other people’s money.”
So far, the trustee has repaid roughly $750 million provided by Securities Investor Protection Corp. (SIPC), as well as the $1.5 billion recouped from his firm and by selling his personal assets.
Madoff, former investment advisor and chairman of the Nasdaq Stock Exchange, in March 2009 pleaded guilty to a massive fraud involving his investment management business, bilking investors out of more than $50 billion dollars.
He is currently in prison serving a sentence of 150 years, after his Ponzi scheme involving Bernard L. Madoff Investment Securities LLC was publicized in December 2008.
HSBC Sued
On Monday, the trustee seeking assets on behalf of Madoff’s victims sued London-based HSBC Holdings Plc, Europe’s biggest bank by assets, for $9 billion on allegations of misconduct.According to a statement by Irving H. Picard, the lawsuit—filed in the U.S. Bankruptcy Court in Manhattan—alleged that the bank and its affiliates aided the conman in defrauding his investors.
The complaint accused HSBC of creating and marketing an international network of feeder hedge funds based in multiple jurisdictions that fed money to Madoff’s investment firm, up to $9 billion. Picard said that HSBC should have known about Madoff’s fraudulent behavior, as one of HSBC’s consultants, KPMG, raised concerns regarding Madoff’s business ventures.
“Had HSBC and the defendants reacted appropriately to such warnings and other obvious badges of fraud outlined in the complaint, the Madoff Ponzi scheme would have collapsed years, billions of dollars, and countless victims sooner,” Picard said in a statement.
JPMorgan, UBS Accused of Wrongdoing
Earlier, the Madoff trustee filed separate lawsuits against New York-based JPMorgan Chase & Co. for around $6.4 billion, and Switzerland-based banking giant UBS AG for around $2 billion.According to a statement by Picard, “The complaint seeks to recover nearly $1 billion in fees and profits and an additional $5.4 billion in damages for [Morgan’s] decades-long role as [Madoff’s] primary banker, aiding and abetting Madoff’s fraud.”
On Nov. 24, the trustee sought to recover $2 billion from UBS. Its allegations were similar to those levied against HSBC, namely creating feeder funds to funnel cash into Madoff’s investment firm.
Picard also accused the firms of knowingly disregarding indicators of fraud.
But analysts say that proving knowledge of fraud is difficult—there’s a difference of condoning fraudulent acts and actively finding it. Even the Securities and Exchange Commission failed to act on reining in Madoff, despite alerts of fraud from multiple sources.
Former Clients Targeted
The Madoff trustee has also sued a number of former Madoff clients, accusing them of withdrawing more money than they were entitled to due to Madoff’s fictitious profits. Among the former clients of Madoff now being sued include Thomas H. Lee and Blue Star Investors LLC.According to Picard, such profits were considered to be “other people’s money.”
So far, the trustee has repaid roughly $750 million provided by Securities Investor Protection Corp. (SIPC), as well as the $1.5 billion recouped from his firm and by selling his personal assets.
