HSBC : is sued in U.S. for $250 million over alleged role in ‘death bonds’

HSBC Holdings Plc was sued for $250 million on Friday for allegedly ignoring red flags that a colorful British entrepreneur, the late David Elias, was committing fraud through an investment vehicle he controlled.

The complaint was filed in the U.S. District Court in Manhattan by the liquidator of Luxembourg-based SLS Capital SA, which failed in 2009, the same year Elias died.

According to the complaint, HSBC had been a custodian of life insurance policies used as collateral for bonds that SLS sold to investors, and which were falsely marketed as safe.

An HSBC spokeswoman declined to comment.

Companies in the so-called life settlement business buy life insurance policies on older individuals, and can collect death benefits when the insureds die. Securities backed by such policies are sometimes known as “death bonds.”

One prominent seller of these bonds was Keydata Investment Services, which had business dealings with SLS, and whose sale of the bonds caused big losses for thousands of UK pensioners.

Read on.

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