HSBC Wins Statute of Limitations Motion Dismissing $324 Million in Claims Related to Bernie Madoff’s Ponzi Scheme

Cleary Gottlieb represents HSBC in defending against millions of dollars of claims brought by Irving H. Picard, the trustee appointed by the Securities Investor Protection Corporation to liquidate Bernard L. Madoff Investment Securities LLC (BLMIS).

The trustee has spent the last 15 years seeking to recover transfers of customer property traced to Bernie Madoff’s Ponzi scheme.

The Bankruptcy Code gives the trustee one year following the avoidance of a transfer to seek to recover that transfer from a subsequent transferee. After first initiating an adversary proceeding against HSBC in 2009, the trustee filed his first amended complaint in 2010, alleging that certain HSBC entities aided and abetted the BLMIS fraud by encouraging its customers to invest in BLMIS feeder funds. The trustee also alleged that certain HSBC entities received subsequent transfers from certain of those feeder funds.

In 2023, more than a decade later, the trustee filed a second amended complaint alleging for the first time that HSBC entities PBRS and HBUS received transfers from the feeder funds Fairfield Sentry and Fairfield Sigma. Notably, the original 2010 complaint contained no allegations regarding transfers from either Fairfield fund, nor did it identify any particular transfers received by PBRS. In July 2024, Cleary wrote to the trustee’s counsel urging him to voluntarily dismiss his claims to claw back the newly alleged transfers because those claims were plainly time-barred. After the trustee refused to do so, in March 2025, Cleary filed a motion for judgment on the pleadings based on a statute of limitations theory. On May 29, 2025, Cleary partner Nowell Bamberger presented oral argument before the Bankruptcy Court for the Southern District of New York.

On September 29, 2025, the Bankruptcy Court granted HSBC’s motion for judgment on the pleadings and dismissed the newly alleged transfers, which amounted to $324 million. The Bankruptcy Court held that the newly alleged transfers arose from fundamentally different conduct than what was originally alleged, and as a result, HSBC did not receive adequate notice within the statute of limitations period. The Bankruptcy Court emphasized that the allegations in the original complaint centered on how HSBC marketed Fairfield Sentry to third-party clients (actions that occurred before any money was invested into Fairfield Sentry), whereas the newly alleged subsequent transfer claims concerned actions that HSBC allegedly took after funds were invested in the Fairfield Sentry. Since the newly alleged claims relied on entirely distinct facts, the court held that they did not relate back to the claims alleged in the first amended complaint.

The Cleary team representing the HSBC defendants included partners Jeffrey Rosenthal, Nowell Bamberger, and Joseph Kay, and associates Thomas Lynch, Adrian Gariboldi, Regina Paparo, Daniel Elkind, Andrew Older and Ariel Sheffey.