HSBC, custodian of a fund that lost about $1.5bn through Bernard Madoff’s Ponzi scheme, said liability rules for banks in Europe weren’t as strict at the time of the scandal surrounding the convicted fraudster.
Thema International Fund Plc is seeking about $1.5bn in damages. The case is the first of dozens of disputes in Europe to focus on the liability of banks as custodians to investment funds that put money with Madoff, who was charged in December 2008.
HSBC faces more than 50 complaints in Ireland over claims it failed to discover Madoff’s activities. The fraud hurt several European Union-regulated funds, or UCITS, like Dublin-based Thema. At least three UCITS, which stands for Undertakings for Collective Investment in Transferable Securities, have since been liquidated.
At the time 'there was no strict liability' on the custodian, Paul Gallagher, a lawyer for the London-based bank, told Judge Peter Charleton during his opening arguments. 'Since the Madoff scandal', European legislators proposed new rules that 'will impose a strict liability regime on the custodian'.
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