29-07-2011: Madoff - Reaction of Deminor to the US decision rejecting the US Trustee's common law claims against HSBC

 

Deminor takes notice of yesterday's (New York time) decision rendered by Judge Rakoff of the US District Court of New York denying to the US Trustee the legal standing to sue HSBC, as service provider to the so-called "Madoff feeder-funds", for damages based on common law claims.

Deminor wishes to express its preliminary view on this decision. Deminor represents more than 2.500 investors in the Madoff feeder-funds promoted in Europe, including 800 investors in funds for which HSBC acted as service provider (e.g., custodian bank of the Herald Lux fund).

The decision, which will likely apply also to other similar defendants such as UBS facing US court actions, implies that the service providers are only liable towards the investors in the feeder-funds who are the direct victims of the service providers' wrongdoing. The natural place of jurisdiction for the court actions brought by investors is the country where the service provider operates (e.g., Luxembourg), taking into further account that the investors in the HSBC- and UBS- related feeder-funds are non-US citizens and have suffered their losses in Europe.

As a result of this decision, it becomes clear that the overwhelming bulk of those banks' liability will have to be exclusively assessed by the competent European courts. Investors in the European feeder-funds can not rely anymore on the US Trustee's actions for damages to obtain a fair compensation for their losses and are therefore encouraged to undertake appropriate legal initiatives in Europe, as efficient litigation will help them maximize their own potential of recovery".