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Losses From Madoff Ponzi Scheme Closing in on HSBC and UBS for $3.2 Billion

Two of the largest banks in Europe, HSBC and UBS may soon find themselves responsible for approximately $3.2 billion from the Madoff Ponzi Scheme through their part as custodians of accounts in  Luxemborg as well as Ireland.

Acting as custodians, the banks are held responsible for the management and oversight of the accounting of funds and any transfer of either cash or assets from or to investors. Several private institutions and individuals are reporting that HSBC and UBS alike failed to maintain their responsibility of the assets.

Furthermore, Bloomberg reported that legal counsel for retail and institutional investors that suffered losses, Isabelle Wekstein-Steg, wrote the regulator of Luxemburg with a request for the reimbursement of funds for her clients.

However, the bank's lawyer, Paul Mousel, claims that the banks had a small contribution as custodians and that the investors created an arrangement with Madoff which was specifically intended for investment with him.

Furthermore, the AFP claims that the Madoff Ponzi Scheme has also created a combined exposure to three Luxemburg investment funds totalling between five billion ($6.6 Billion) and seven billion euros, this information was cited from a Luxemburg parliament financial crisis commission.

Stock in HSBC plummeted 4.4 percent Thursday though UBS's rose 1.3 percent for European banks. If HSBC or UBS found responsible for the losses to the investors of the Madoff Ponzi Scheme, their exposure to the scheme would increase significantly.

Neither HSBC or UBS is readily accepting responsibility for the Madoff Ponzi Scheme. In a December statement, HSBC claimed that they have approximately $1 billion in exposure to the scandal.

Previously UBS claimed that they did not have any exposure to the Madoff Ponzi Scheme.