Two Irish-listed investment companies that gave sums of more than $1.1 billion to the Irish arm of banking giant HSBC to administer have initiated Commercial Court proceedings in a bid to get the money back.
HSBC allegedly gave those funds to the alleged $50 billion fraudster Bernard Madoff and his company to invest.
HSBC Securities Services (Ireland) Ltd and HSBC Institutional Trust Services (Ireland) Ltd have not returned the monies so far - apparently out of concerns related to possible Madoff-linked litigation against it and others in the US, including potential 'claw-back' claims by the US receiver of Madoff's estate under US bankruptcy laws, Mr Justice Peter Kelly was told.
Donal O'Donnell SC, for the plaintiff companies, said his clients are contending the matter is governed by Irish law and that the US receiver could not properly exercise jurisdiction relating to any such payments.
The judge heard HSBC had told the plaintiff companies that information with regard to the assets of the funds 'may not be reliable' given the alleged Madoff fraud.
The judge said he believed this was the first litigation here deriving from the infamous Madoff bankruptcy in the US. He listed for hearing on Tuesday applications by the fund companies to prevent their monies being dissipated or removed outside the Irish jurisdiction without leave of the court.
The companies also want orders directing the HSBC companies to pay all invoices addressed to the plaintiffs. They say they are exposed to claims from investors which, unless the funds held by HSBC are protected, they have no way of defending. They also say HSBC has effectively frozen their ability to pay expenses, including lawyers fees, and their continuing existnce is 'imperilled'.
Both plaintiff companies are structured as 'umbrella funds', which means investors in them can choose to invest in one or more sub-funds.
Thema International Fund and AA (Alternative Advantage), the two plaintiff companies, are structured as 'umbrella funds', which means investors in them can choose to invest in one or more sub-funds.
Thema operates one sub-fund, the Thema fund, which was said to have had assets of $1.1 billion on November 28, most in Bernard Madoff Investment Securities LLC. Its administrator is HSBC Securities, while its trustee and custodian is HSBC Institutional.
AA operates the Landmark Investment Ireland Fund, the Tulkan Fund and other sub-funds. It suspended dealings in those funds when the Madoff collapse emerged. AA claims the HSBC defendants must return a total of €107m relating to the Landmark Fund and other sub-funds.
