HSBC Holdings Plc said claims the bank aided the fraud of convicted swindler Bernard Madoff were unfounded and it would defend itself vigorously against all Madoff-related claims.
U.S. court-appointed trustee Irving Picard sued HSBC for $9 billion on Sunday, accusing it of aiding the Madoff fraud through the creation, marketing and support of an international network of a dozen feeder funds.
On Monday, the trustee announced a settlement of $500 million with private Swiss bank Union Bancaire Privee (UBP) and a related fund, M-Invest Limited, incorporated in the Cayman Islands.
The agreement brings the total Picard has recovered for defrauded investors to about $2 billion. The lawyer and his team are searching the globe for about $36 billion. When U.S. prosecutors arrested Madoff on December 11, 2008, they said his fraud amounted to as much as $65 billion.
The UBP settlement agreement is the largest feeder fund bank cash settlement to date and the first major international bank settlement, two important milestones for the overall recovery initiative, Picard said in a statement.
UBP said in a statement that, although UBP strongly denies that it had any liability to the trustee, it has agreed to the settlement in order to protect its clients and definitively close this chapter.
Earlier on Monday, an HSBC spokesman said the bank was defending itself against Madoff-related claims brought against it in various jurisdictions, including U.S. class action cases.
HSBC believes that the U.S. court appointed trustee's claims of wrongdoing are unfounded and it will defend itself vigorously against those claims as well, the spokesman said.
Madoff, 72, is serving a 150-year prison sentence after pleading guilty in March 2009 to a decades-long fraud through his firm, Bernard L. Madoff Investment Securities LLC, which swindled thousands of investors worldwide.
The so-called feeder funds named in the HSBC lawsuit in U.S. Bankruptcy Court in New York included Swiss firm Genevalor, Benbassat & Cie, which said it strongly denied any wrongdoing and rejected the claims.
In particular, it strongly denies any allegation that it had prior knowledge of the fraud committed by Madoff, Genevalor said, adding: This unfounded action causes a significant harm to the investors and to itself.
(Reporting by Grant McCool in New York and Steve Slater in London; editing by Dan Lalor and Andre Grenon)