Madoff's investment fraud: HSBC books $1.1 billion provision; shares dip

HSBC Bank on Monday disclosed a financial charge of $1.1 billion related to a claim by a European fund tied to the late Bernard Madoff’s investment fraud.

The provision will be reflected in the lender’s third-quarter results due Tuesday, the London-headquartered bank said. Following the announcement, HSBC’s shares slipped about one percent in early London trading.

The move comes after HSBC lost part of an appeal in a Luxembourg court ruling last Friday. The case relates to Herald Fund, which filed a lawsuit in Luxembourg in 2009, the same year Madoff was sentenced to 150 years in prison for running one of the world’s largest financial frauds.

In its statement, HSBC noted that “the eventual financial impact could be significantly different” from the $1.1 billion it is currently setting aside, as quoted by AFP.

Madoff, a New York-based financier, ran a Ponzi scheme that deceived tens of thousands of investors worldwide. The scam used new investors’ money to pay earlier clients, creating the illusion of steady returns.

Madoff died in prison in 2021 from chronic kidney failure.

The fraud unraveled during the 2008 financial crisis, when Madoff could no longer meet investors’ withdrawal requests. Many victims lost their life savings or were forced to postpone retirement.