HSBC has vowed to fight a $250 million (£151 million) lawsuit, which alleges it aided fraud in relation to failed investment company Keydata.
The claim was filed to a New York court last week by Baden & Baden, which is the liquidator for life settlement vehicle SLS Capital, and has been backed by a group of 900 Keydata investors, according to The Financial Times.
SLS Capital issued life settlement bonds which were then marketed by Keydata.
The liquidator accused the US subsidiary of failing to spot a number of ‘red flags’ in the run-up to SLS Capital’s liquidation in 2009, and of playing a ‘critical role in the eventual demise of SLS’ and ‘failing to prevent’ a fire sale of the SLS portfolio.
The claim added that HSBC was the custodian of the life policies that underpinned the bonds but did little to correct misleading marketing material that said the bank was the trustee of the bonds.
HSBC said: 'We will respond by filing a motion to dismiss the complaint. As this is a legal matter, we have no further comment.'
This is the second legal battle launched by Baden & Baden in its role as SLS Capital’s liquidator.
In July it issued a claim against US brokerage firm CRT Capital for fraud, misrepresentation, negligence, breaching its fiduciary duty and unjust enrichment.
CRT was the financial adviser to SLS and at one stage owned 50% of its shares.
CRT told the FT: ‘We believe the claims SLS is pursuing against CRT Capital are wholly without merit.
The lawsuit also follows proposed legal action by Keydata founder Stewart Ford’s who earlier this month outlined plans to sue the FCA for £371 million over the company’s demise.
In August Ford wrote to the regulator accusing its predecessor, the Financial Services Authority of a ‘politically motivated’ abuse of power arguing that it targeted Keydata as a means to restore its reputation as a ‘robust regulator’.