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07 Dec, 2010

Scam was sustained by HSBC - lawyer

Irving Picard the New York lawyer who has been appointed as the trustee for Madoff's victims, the man in charge of liquidating the con man's bankrupt investment firm, is claiming that HSBC continued to act for funds that fed money into Bernard Madoff's Ponzi scam in spite of repeated warning.

HSBC allegedly ignored steps to protect its investors against the scam, as the bank's own executives and outside auditors have warned against the "baffling" and potentially fraudulent structure of the fund, according to a US lawsuit launched against the global bank.

In the $9billion claim against HSBC, amongst other European institutions, Picard claims that scam warnings began as early as 2001, seven years before the scheme collapse, revealing one of the biggest frauds in history.

The HSBC complaint was made public on Monday as the trustee announced his largest settlement to date, with a bank-sponsored feeder fund that sent money to Mr Madoff. Picard said that Union Bancaire Privée, the Swiss private bank, had agreed to pay up to $500 million into a restitution fund for Mr Madoff's victims. Under the settlement, which must be approved by a bankruptcy judge, UBP will pay $470 million to benefit Madoff's victims. The deal also provides for an additional payment of as much as $30 million, according to court papers.

"The UBP settlement agreement is the largest feeder fund bank cash settlement to date, and the first major international bank settlement", Irving Picard said yesterday in a statement. The settlement brings to $2 billion of Picard's recoveries for creditors of Bernard L. Madoff Investment Securities LLC.

We believe the agreement and the settlement payment represents a reasonable compromise among the parties involved and, importantly, adds a guaranteed half-billion dollars to the Madoff Customer Fund, added David J. Sheehan, a lawyer for Mr Picard.

Madoff, 72, is serving a 150-year sentence in a federal prison in North Carolina, after admitting he directed the biggest Ponzi scam in history. At the time of his arrest, Madoff's account statements reflected 4,900 accounts with $65 billion in nonexistent balances.

Including the HSBC suit, Picard is seeking a total of more than $33 billion from Madoff and his family, former employees, banks, feeder funds and investors alleged to have profited from the scam. That amount is said to surpass the estimated $20 billion in principal lost by Madoff investors.

In its defence, HSBC said in a statement that Picard's allegations are "unfounded" and that it will defend itself against them in court.

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