Madoff trustee sues Medici fund for $578 million

NEW YORK - The trustee hunting for assets linked to the Bernard Madoff fraud on Tuesday sued an investment fund controlled by Austria¡¯s Bank Medici and the fund¡¯s custodian, a unit of HSBC Holdings Plc , for $578 million.

By (Reuters)

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Published: Wed 15 Jul 2009, 12:06 PM

Last updated: Thu 2 Apr 2015, 7:36 AM

The case is the latest “clawback” lawsuit against a large Madoff investor. Court-appointed trustee Irving Picard is seeking the return of money withdrawn from Madoff’s investment operation for the benefit of Medici’s Herald Fund, mainly in the few months before the swindler’s December 2008 arrest.

The defendants are not accused of knowing about Madoff’s vast fraud, but the trustee contends they ignored red flags and should have realized that the disgraced financier’s returns were too good to be true.

Medici, now known as 20.20 Medici AG after giving up its banking license, was investment manager of several funds that had channeled at least $3.3 billion to Madoff.

It has called itself one of the biggest victims of the fraud run by the former Nasdaq market chairman, who entered prison in North Carolina on Tuesday to begin his effective life sentence for operating a $65 billion Ponzi scheme. ¨ûID:nN14264746¨ü

A Medici spokeswoman could not immediately be reached for comment on Tuesday. Medici previously has been sued by investors in Austria and the United States over their losses tied to the Madoff fraud.

The trustee’s lawsuit, filed in U.S. Bankruptcy Court in Manhattan, says the funds transferred by Madoff for the Herald Fund’s benefit should be returned to help compensate other Madoff clients. It cites transfers including $113 million in October 2008 and $423 million a month later.

The Herald Fund, which operated out of the Cayman Islands, invested more than $1.5 billion with Madoff since 2004, the lawsuit says.

UniCredit SpA holds a 25 percent stake in Medici, with Medici Chairwoman Sonja Kohn owning the rest.

Also named as defendants were HSBC Securities Services SA in Luxembourg, which was custodian of the Herald Fund’s assets, and HSBC Bank Plc. An HSBC representative was not immediately available for comment.

The Herald Fund in April launched legal action in Luxembourg against HSBC Securities Services, saying it failed in its duties as a custodian.

The case is Irving H. Picard v Herald Fund SPC and HSBC Bank Plc and HSBC Securities Services (Luxembourg) SA, 08-01789, U.S. Bankruptcy Court for the Southern District of New York (Manhattan)

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