Judge rejects HSBC offer to Madoff victims

A Manhattan federal judge has rejected HSBC's proposed $62.5 million (£31.2 million) settlement with investors in an Irish fund that lost money in Bernie Madoff's Ponzi scheme.

In a ruling on Wednesday, US District Judge Richard Berman said the accord announced June 7 "is not fair, reasonable or adequate - even at this preliminary stage" to investors in Thema International Fund Plc.

HSBC said it had acted as a custodian to the fund, and provided administration and other services.

The bank was sued in January 2009, one month after Madoff's fraud had been uncovered. Berman said the accord had several "obvious deficiencies". Among these were inadequate disclosure of legal costs, and the setting aside of a $10 million "reserve" for legal fees and expenses for investors to pursue claims against non-settling defendants outside the US.

The judge said he would consider a revised accord, and "generally favours the voluntary settlement of matters before it, including the settlement of purported class actions". In June, HSBC estimated that Thema investors had lost about $312 million. It also said various funds it serviced had transferred a net $4.3 billion to Madoff's firm.

Irving Picard, the trustee seeking money for Madoff victims, accused HSBC in a separate lawsuit of ignoring "red flags" about Madoff's fraud. A different federal judge, Jed Rakoff, in July voided about $6.6 billion of Picard's claims against HSBC, saying the trustee lacked the authority to bring them.

Madoff, 73, pleaded guilty to running his Ponzi scheme in 2009, and is serving a 150-year sentence.