HSBC to recognize $1.1 billion in provision after court ruling in Madoff case
A view of the HSBC bank’s logo on a wall outside a branch in Mexico City, Mexico, on June 14, 2024.
Henry Romero | Reuters
HSBC said on Monday it would make a $1.1 billion provision in its third-quarter results after a court decision Concerning the Bernard Madoff investment fraud case in Luxembourg.
Herald Fund SPC sued HSBC’s Luxembourg unit in 2009, demanding the return of securities and cash it said were lost in the fraud.
The court rejected HSBC’s objection to the Herald’s request for a securities refund, but granted the unit’s objection to its cash refund request.
The bank will now lodge a second appeal before the Luxembourg Court of Appeal and, if unsuccessful, will challenge the amount payable in further proceedings, it added.
Madoff has been described as the mastermind of the largest investment fraud in the United States, defrauding customers of up to $65 billion. He pleaded guilty in 2009 to a conspiracy that began in the early 1970s and robbed more than 40,000 people in 125 countries over four decades before he was captured on December 11, 2008.
Madoff’s victims included director Steven Spielberg and actor Kevin Bacon, as well as many ordinary investors. Madoff was sentenced to 150 years in prison and passed away in 2021.
In the interim report For 2025, announced in July, HSBC said the Herald is seeking a refund of securities and cash from HSBC amounting to $2.5 billion plus interest, or compensation of $5.6 billion plus interest.
HSBC said that various HSBC companies outside the United States provided custody, management and similar services to certain funds whose assets were invested with Bernard Madoff Investment Securities.
The news came a day before HSBC announced its results, with the bank saying the $1.1 billion provision would impact the Common Equity Tier 1, or CET1, rate by around 15 basis points.
The CET1 ratio is a measure of a bank’s financial strength and is used to determine the bank’s ability to withstand distress.
HSBC said the final financial impact could be “significantly different” given the pending objections.
—CNBC’s Marty Stienberg and Scott Cohn contributed to this report.
