HSBC Anticipates $1.1 Billion Loss Due to Madoff Ponzi Scheme Fallout

(Alliance News) – HSBC sets aside USD1.1 billion for a Luxembourg court ruling related to the Bernard Madoff fraud case, while the UK competition regulator asks for remedies to approve the Greencore-Bakkavor merger.

Here is what you need to know before the London market open:

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MARKETS

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FTSE 100: called up 0.2% at 9,662.02

GBP: higher at USD1.3318 (USD1.3301 at previous London equities close)

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ECONOMICS

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Advertised job vacancies in the UK fell last month as employers continued to cut back on recruitment and wait for next month’s Budget, according to a new report. Jobs site Adzuna said the total number of advertised vacancies dropped by 2.4% in September compared to August to 826,205. Adverts for jobs are now 4.1% lower than a year ago, with September recording the lowest vacancy level this year, said Adzuna. Its report said employers were continuing to scale back hiring plans after a strong start to the year, pausing recruitment activity as they await November’s Budget. There are now more than two jobseekers for every vacancy, the highest ratio since early 2024, said Adzuna.

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The UK Financial Conduct Authority is in early-stage discussions about changing its rules to shorten the process for companies to go public by a week, Bloomberg News reported Friday. The regulator is considering scrapping its two-stage filing system, according to people familiar with the matter. The FCA has not yet set a timeline for the potential reform, and there is no certainty that it will go ahead. The change would reverse a rule from 2018 that was supposed to bring external research into IPOs to give investors a more independent perspective.

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BROKER RATINGS

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Citigroup cuts Centrica to ‘neutral’ (buy) – price target 185 pence

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Jefferies raises GSK to ‘buy’ (hold) – price target 2,000 (1,450) pence

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RBC starts Trustpilot with ‘outperform’ – price target 290 pence

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COMPANIES – FTSE 100

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HSBC says it will recognise a USD1.1 billion provision in its third quarter results after a ruling in Luxembourg relating to the Bernard L Madoff Investment Securities fraud. The bank says the Luxembourg Court of Cassation denies subsidiary HSBC Securities Services Luxembourg’s appeal in respect of Herald Fund’s securities restitution claim, but accepts HSSL’s appeal of Herald’s cash restitution claim. In a 2009 lawsuit relating to the Madoff fraud, HSSL is defending a claim brought by Herald Fund for the restitution of securities and cash. HSSL says it will now pursue a second appeal before the Luxembourg Court of Appeal. If it is unsuccessful in the appeal, it says it will contest the amount it is required to pay. HSBC says it will recognise a USD1.1 billion provision in its third quarter results, with a 15 basis point impact on its CET1 capital ratio. “Given the pendency of the second appeal and the complexities and uncertainties associated with determining the quantum of restitution, the eventual financial impact could be significantly different,” HSBC notes.

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GSK buys exclusive rights from Syndivia for an antibody-drug conjugate in prostate cancer. The rights are to develop and commercialise a preclinical antibody-drug conjugate for metastatic castration-resistant prostate cancer. The drug has shown “enhanced anti-tumour activity” and an “encouraging safety profile” which demonstrates “best-in-class potential,” GSK says. In preclinical studies, the antibody-drug conjugate was effective at shrinking tumours without causing a “proportional increase” in significant side effects. Under the agreement, Syndivia will receive an upfront payment as well as success-based development and commercial milestone payments up to a total of GBP268 million. The firm will also receive tiered royalties on future product sales worldwide. “The addition of this ADC builds on GSK’s growing portfolio and strengths in tumour-targeted technologies,” says Senior Vice President Hesham Abdullah.

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COMPANIES – FTSE 250

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Dowlais says the European Commission has unconditionally cleared its takeover by American Axle. The London-based automotive engineering firm says it is awaiting the antitrust green light in Brazil, Mexico and China. It expects clearance in Brazil in early November, with agreement in Mexico forecast for the fourth quarter of 2025. In China, Dowlais says the parties are “actively engaging” with the State Administration for Market Regulation with clearance expected in late 2025 or early 2026. Based on this progress, Dowlais says it expects the takeover to close in the first quarter of 2026. Dowlais says Chief Financial Officer Roberto Fioroni will now not join the senior executive team of the enlarged firm, as he wishes to pursue other opportunities.

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The UK Competition & Markets Authority says it is considering an undertaking from Greencore and Bakkavor to approve the merger of the two companies. The CMA says Greencore’s planned acquisition of Bakkavor “may be expected to result in a substantial lessening of competition ” in the UK. The regulator says it will refer the merger for a probe if no undertaking is offered by next Monday. Greencore says it is pleased that the CMA does not have competition concerns “in the vast majority of areas reviewed”. The Dublin-based convenience food maker says the CMA found no competition concerns in relation to around 99% of the revenue of the combined group. The regulator found that there may be a “realistic risk of a competition concern” in relation to the supply of own label chilled sauces in the UK. “Greencore and Bakkavor will continue to work constructively with the CMA to bring these matters to a conclusion, in line with our expectations and original guidance of completion of the transaction in early 2026,” the firm says.

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OTHER COMPANIES

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Petrofac says it has applied to the High Court of England & Wales to appoint administrators. It notes that this is a targeted administration of the group’s ultimate holding company only. The energy infrastructure company says its operations will continue to trade. Options for alternative restructuring and M&A solutions are being “actively explored” with key creditors, including noteholders who are supporting the firm with continued forbearance arrangements while it explores alternative options. Petrofac says it retains the support of revolving credit facility and term loan lenders who continue to extend maturities on a rolling basis. “When appointed, administrators will work alongside executive management to preserve value, operational capability and ongoing delivery across the group’s operating and trading entities,” Petrofac says.

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Renew Holdings refinances its existing revolving credit facility under improved terms and an extended maturity. The new GBP140 million facility replaces the existing GBP120 million deal and has been made available to the company for a committed four-year term expiring in October 2029. “The refinancing reflects the continued confidence of the group’s banking partners in Renew’s resilient business model, strong cash generation and long-term growth prospects,” the company says.

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By Michael Hennessey, Alliance News reporter

Comments and questions to [email protected]

Copyright 2025 Alliance News Ltd. All Rights Reserved.

What potential conflicts of interest existed for HSBC as an administrator for feeder funds investing with Bernie Madoff?

The Scale of the Madoff Scandal & HSBC’s Exposure

HSBC, one of the world’s largest banking and financial services organizations, is bracing for a ample $1.1 billion loss stemming from its connection to the infamous Bernie Madoff Ponzi scheme. This anticipated financial hit, revealed in late 2025, underscores the long-lasting repercussions of Madoff’s decades-long fraud and the continuing fallout for financial institutions. The Madoff investment scandal, a massive $64.8 billion fraud, continues to reverberate through the financial world, even years after Madoff’s arrest in 2008.

This loss isn’t a new discovery, but rather a refined estimate based on ongoing legal proceedings and settlements related to feeder funds that channeled investments into Madoff’s scheme.HSBC’s exposure primarily comes through its HSBC Securities Services division, which acted as an administrator for several of these feeder funds.

Breakdown of the $1.1 Billion Loss

The $1.1 billion figure represents a provision HSBC is setting aside to cover potential liabilities. This includes:

* litigation Costs: Ongoing and future legal battles with investors who lost money through the feeder funds. These lawsuits allege HSBC failed to adequately supervise the funds and detect the fraudulent activity.

* Settlement Agreements: Reaching out-of-court settlements with investors to avoid protracted and costly litigation.

* Regulatory Penalties: Potential fines and sanctions from regulatory bodies like the U.S. Department of Justice and the Securities and Exchange Commission (SEC).

* Operational Costs: Expenses related to internal investigations, compliance enhancements, and remediation efforts.

Key Feeder Funds Involved

Several feeder funds with ties to HSBC played a crucial role in funneling investments to Madoff. Notable examples include:

* Fairfield Greenwich Group: A prominent hedge fund that directed billions of dollars to Madoff. HSBC provided management services to Fairfield Greenwich.

* Kingate Global Fund: Another significant feeder fund that relied on Madoff’s supposed investment strategies.HSBC also served as an administrator for Kingate.

* Ascendant Capital Partners: This fund also utilized Madoff’s services and had a relationship with HSBC Securities Services.

These feeder funds presented themselves as legitimate investment vehicles, attracting investors with promises of consistent, high returns. The lack of openness and due diligence surrounding Madoff’s investment strategy allowed the scheme to persist for decades.

HSBC’s Defense and Legal Challenges

HSBC maintains that it acted responsibly and was also a victim of Madoff’s fraud. The bank argues it relied on the information provided by the feeder funds and had no knowledge of the underlying Ponzi scheme. However, plaintiffs in the lawsuits contend that HSBC had a duty to exercise greater scrutiny and should have detected red flags indicating fraudulent activity.

Key arguments against HSBC include:

1. Lack of Independent Verification: Failure to independently verify the investment strategies and performance reported by the feeder funds.
2. Insufficient Due Diligence: Inadequate due diligence procedures to identify and assess the risks associated with investing in Madoff’s funds.
3. Ignoring Warning Signs: Allegations that HSBC ignored internal warnings and external reports raising concerns about Madoff’s operations.

Regulatory Scrutiny & The Role of the SEC

The Madoff scandal triggered a widespread examination into the SEC’s oversight failures. The SEC Inspector General’s report revealed a series of missed opportunities to uncover Madoff’s fraud, including repeated warnings from whistleblowers that were dismissed or inadequately investigated.

HSBC has faced scrutiny from regulators regarding its compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations. The Madoff case highlighted weaknesses in these areas and prompted calls for stricter regulatory oversight of financial institutions. The SEC continues to refine its rules and enforcement practices to prevent similar schemes from occurring in the future.

Impact on HSBC’s Financial Performance

The $1.1 billion provision will negatively impact HSBC’s financial results for the reporting period. While HSBC remains a financially strong institution,this loss serves as a reminder of the potential risks associated with complex financial products and the importance of robust risk management practices. Analysts predict the loss will likely lead to a slight decrease in HSBC’s earnings per share.

Lessons Learned & future Implications for Investment Management

The Madoff scandal and HSBC’s subsequent fallout offer several crucial lessons for the investment management industry:

* Enhanced Due Diligence: The need for rigorous due diligence on all investment managers and strategies.

* Independent Verification: The importance of independently verifying investment performance and asset valuations.

* Transparency and Disclosure: Greater transparency and disclosure of investment risks to investors.

* Strengthened Regulatory Oversight: The necessity of robust regulatory oversight to detect and prevent fraudulent activity.

* Whistleblower Protection: Protecting and incentivizing whistleblowers to report suspicious activity.

The Madoff Ponzi scheme remains a cautionary tale, emphasizing the devastating consequences of fraud and the critical role of vigilance and accountability in the financial system. the ongoing fallout for institutions like HSBC underscores the long-term impact of such schemes and the importance of learning from