Banking giant HSBC has announced a $1.1 billion provision tied to a long-running legal battle involving funds connected to the late American financier Bernard Madoff’s massive Ponzi scheme.
The provision, which will appear in HSBC’s third-quarter earnings report due Tuesday, relates to a Luxembourg lawsuit filed in 2009 by Herald Fund, one of several European investment funds caught in the fallout of Madoff’s multibillion-dollar fraud.
In a statement on Monday, the London-based lender said it was setting aside the sum following a recent court setback in Luxembourg, where the bank lost part of an appeal on Friday.
HSBC cautioned that “the eventual financial impact could be significantly different” from the current estimate.
The announcement sent HSBC shares down about 1 percent in early London trading.
Legacy of a Global Financial Scandal
Madoff’s fraudulent empire — one of the largest investment scams in history — collapsed during the 2008 global financial crisis, wiping out the life savings of thousands of investors across the world.
Operating under the guise of a legitimate investment advisory business, Madoff ran a pyramid-style Ponzi scheme, using funds from new investors to pay returns to existing ones, thereby fabricating consistent profits.
When the scheme unraveled, Madoff admitted to defrauding clients of tens of billions of dollars.
He was sentenced in 2009 to 150 years in prison, where he remained until his death in 2021 from chronic kidney failure.
The Herald Fund lawsuit is one of several ongoing efforts by investors seeking compensation from financial institutions accused of failing to detect or prevent Madoff’s fraudulent activities.
Despite the hefty provision, HSBC emphasized that it remains financially strong and capable of absorbing the impact within its current capital framework.
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