HSBC Holdings Plc (HSBA) settled a lawsuit over millions in losses by a fund that invested with Bernard Madoff, ending what would have been a six-week trial in Dublin the day after it started. HSBC settled the dispute with Kalix Fund Ltd., a spokesman said by e-mail today, without disclosing the terms. Kalix sought $35.6 million from the bank, which it said was responsible for safeguarding the money it placed in Thema International Fund Plc (TIFHUQE), which invested with Madoff. More on Bloomberg Businessweek [...]

A former employee of convicted Ponzi scheme operator Bernard Madoff pleaded guilty to criminal charges on Thursday but denied having any knowledge of the massive fraud. Irwin Lipkin, 74 years old, is the ninth person to plead guilty to criminal charges in the government’s probe, which is approaching its fifth year. More in the Wall Street Journal here. [...]

NEW YORK–Signing a form for a client might seem like a harmless way to expedite paperwork and save the client a hassle. But some recent disciplinary cases show how much forging a signature, even with the best of intentions, can cost a broker. Take, for instance, the Financial Industry Regulatory Authority’s action against a former broker at CUNA Brokerage Services Inc. Finra alleged that she falsified the signatures of three customers on IRA forms and a variable annuity disclosure form between late 2010 and early this year. She forged “two of the customers’ signatures with their knowledge and consent and as accommodations,” according to settlement documents. The third she did without the customer’s knowledge, but under a “good-faith” belief that a power of attorney allowed her to do it. Her firm’s policy prohibited brokers from signing customer names to any documents. More in the Wall Street Journal [...]

HSBC Liable for Ignoring Madoff-Linked Loss: Investors
HSBC Holdings Plc (HSBA) failed to keep millions in clients’ assets invested with Bernard Madoff safe “under lock and key,” investors in an Irish fund said. Kalix Fund Ltd. invested in Thema International Fund Plc (TIFHUQE), which in turn invested with Madoff. London-based HSBC, as Thema’s custodian, didn’t act in time to protect investors’ money from fraud, even though it knew of the risks of dealing with Madoff, a lawyer for Kalix told Judge Peter Charleton in a Dublin court today. The lender also handed over custodian duties to Madoff and then tried to conceal it, the lawyer said.
“The fund was paying a custody fee to HSBC where the bank had delegated that role to somebody else who wasn’t charging,” said John O’Donnell, the lawyer for Kalix. “The obvious and most egregious mistake” by HSBC was taking “no steps from outside the Madoff organization to make sure that the assets were safe.” More on Bloomberg Businessweek [...]

The founders of Fairfield Greenwich Group, which funneled billions of dollars to Bernard Madoff, have agreed to be part of an $80 million settlement to end a lawsuit by some of its investors seeking to recover funds lost in his massive Ponzi scheme. The settlement follows a separate deal by Madoff trustee Irving Picard and the liquidators of Fairfield Greenwich’s various funds last year, in which the Fairfield funds gave up their claim against the Madoff estate to $1 billion lost by investors and agreed to divide any future recoveries from the funds’ operators and others. The new settlement represents a “substantial portion” of the assets that might be recovered from the individual defendants, including Fairfield Greenwich’s founding partners, according to court papers. It is unclear how the deal might affect Mr. Picard’s ongoing litigation against the firm’s founders and others.
More in the Wall Street Journal [...]

More than half of investors’ funds have been recovered nearly four years after Bernard Madoff’s arrest for running the biggest Ponzi scheme ever. The man leading the global hunt for the funds said Monday that he recovered, or reached deals to recover, more than $9.2 billion of the $17.3 billion in principal that investors lost as a result of Mr. Madoff’s scheme, which landed him a 150-year prison sentence. Trustee Irving Picard said he collected $115.3 million by settling 18 cases between April 1 and Sept. 30, the period covered by the status report he filed with the U.S. Bankruptcy Court in Manhattan. During that six-month period, Mr. Picard paid about $2.5 billion to Mr. Madoff’s investors, bringing the total compensation they have received to $3.7 billion. More in the Wall Street Journal [...]

Junk bonds — debt issued by companies with low credit ratings — are growing junkier by the day, with ever weaker companies issuing bonds for ever riskier purposes. The bonds’ falling quality and rising risk, described recently in The Times by Nathaniel Popper, show gaps in investor protection. They also revive concerns about how private equity owners of companies that issue the bonds are using that money. Demand for junk bonds has soared this year, as both institutional and individual investors have sought higher yields in a near-zero interest rate world. As demand has risen, ever shakier companies have been able to find buyers for their debt, leading to a decline in recent weeks in the average credit rating of junk-bond-issuing companies. More in the New York Times [...]