Let's hope HSBC's Madoff sums won't add up

Bernard Madoff, from his prison cell, told the FT the other week that banks were culpable in not spotting his $65bn (£40bn) Ponzi scheme. He would say that, of course, and the swindler offered little evidence to encourage litigants. But here comes the first settlement by a bank acting as a custodian and administrator of assets: HSBC has agreed to pay $62.5m to settle claims brought by investors in Thema, an Irish fund that fed money to Madoff. HSBC did not admit any fault or wrongdoing. It thinks it has "good defences" against other Madoff-related claims and will continue to defend those proceedings "vigorously". HSBC shareholders will hope so because, on the basis of the Thema settlement, the bill could otherwise be large. The bank is settling at 20% of $312m, the sum lost by Thema's investors. But HSBC, acting as custodian and administrator, transferred a grand total of $4.3bn to Madoff Securities. A similar 20% payout to all investors would equate to $860m, which is serious money even for a bank the size of HSBC. One should assume nothing, of course. The Thema case may have had special features, so a back-of-the-envelope extrapolation may be entirely inappropriate. But, equally, it could be a useful guide – litigants now have a figure to aim at.