Thema International Fund

Thema International Fund PLC
Company typeDublin-listed, Undertakings for Collective Investment in Transferable Securities (UCITS) III-certified, open-end fund
FoundedDecember 1996
Headquarters
Dublin
,
Ireland
Productsfeeder fund for Bernard Madoff's securities investment firm (Bernard L. Madoff Investment Securities LLC)
Total assets$1.1 billion (purported net asset value; as of 30 November 2008)
SubsidiariesThema Fund

Thema International Fund PLC, based in Dublin, Ireland, is a Dublin-listed, Undertakings for Collective Investment in Transferable Securities (UCITS) III-certified, open-end fund incorporated in Ireland, which was launched in December 1996.[1][2][3][4][5][6] It created only one sub-fund, the Thema Fund.[3] The fund had a minimum investment requirement of $50,000.[1]

Thema Fund acted as a feeder fund for Bernard Madoff, seeking funds from investors and channeling them to Madoff Securities. As of November 2008, the then-purported net asset value invested in the fund was $1.1 billion. The fund stopped providing redemptions in December 2008, shortly after the Madoff investment scandal broke, and it was discovered that Madoff was running a Ponzi scheme.[7]

Investment manager, investment adviser, and custodian

Bank Medici AG, an Austrian bank, was Thema Fund's investment manager.[2][4][5][8] In return for finding investors, Bank Medici collected fees of 4.6 million euros from Thema International Fund in 2007.[5] Bank Medici is 75% owned by its founder, Austrian banker Sonja Kohn, and 25% owned by Italian banking company Unicredit SpA.[5]

Thema Fund was distributed to investors by Genevalor, Benbassat & Cie., an investment adviser based in Geneva, Switzerland.[5] Universal Investment (based in Frankfurt, Germany), Themis MN Fund Plc (based in Geneva), Carat Lux Sicav Global One, and BG Umbrella Fund were among the fund's investors.[9][10] HSBC Holdings Plc acted as custodian for the fund.[10]

Returns

The fund reported a rate of return of 8% for the 11 months ended 28 November 2007.[5] During the same period, competing funds fell by an average of 39%.[5]

Madoff scandal

Thema Fund acted as a feeder fund for Bernard Madoff's securities investment firm (Bernard L. Madoff Investment Securities LLC), seeking funds from investors and channeling the funds to Madoff Securities.[4][5] As of 30 November 2008, the fund's actual transfers to Madoff Securities minus the fund's withdrawals were approximately $312 million, but the then-purported net asset value invested in the fund at the time was $1.1 billion.[2][11]

The fund stopped providing redemptions on 14 December 2008, shortly after the Madoff investment scandal broke, when it was discovered that Madoff was running a Ponzi scheme, Madoff was arrested, and a U.S. court froze the assets of Madoff Securities.[2][5] Madoff was later sentenced to prison for 150 years.[12] It was alleged that Kohn assisted Madoff in criminal activities in effecting the Ponzi scheme.[2]

Although Thema International Fund was regulated by the European Union as a registered UCITS vehicle, and specifically by the Central Bank of Ireland, the regulators were not effective at uncovering Madoff's scheme.[13][14] Reuters wrote after the scandal broke:

That was the Madoff universe, where regulators vanished and investors didn't care.[13]

Litigation

By December 2009, the fund had been involved in 50 civil lawsuits in Ireland relating to the Madoff scandal.[3][15][16] Individual Thema investors sued Thema International Fund and 27 other defendants, including custodian bank HSBC, in the U.S. District Court for the Southern District of New York in 2009, but in January 2012 the US court held that Ireland was a more appropriate forum to hear the case against HSBC, and dismissed the U.S. case.[17][18]

In 2013, Thema was suing HSBC in Ireland for US$1.5 billion.[19][20] The parties began what was slated to be a 14-week trial in the High Court in Dublin on 30 April 2013.[19][21][22] The case focused on the bank's role and potential liability as "custodian" to the investment fund that deposited money with Madoff.[19] On 29 May 2013 the parties agreed to a settlement of $250 million, or 1/6th of what plaintiff had sought.[23] It was approved by Thema shareholders, and a settlement payment was made from HSBC to Thema. However, no sooner had the bank transfer happened than the Madoff Trustee sought, and won, an injunction preventing Thema from distributing the HSBC settlement proceeds to its shareholders on the basis that the trustee considered some of Thema's shareholders to be Madoff 'bad actors.'[24]

In September 2017 Thema International Fund agreed to pay $687 million to resolve a trustee lawsuit brought on behalf of the fraud victims that followed from Madoff's frauds.[25]

See also

References

  1. ^ a b "TIFHUQD Quote – Thema International Fund PLC – Thema Fund". Bloomberg. 28 November 2008. Archived from the original on 22 April 2012. Retrieved 5 April 2016.
  2. ^ a b c d e Jerome De Lavenere Lussan (2012). The Financial Times Guide to Investing in Funds: How to Select Investments, Assess Managers and Protect Your Wealth. FT Press. ISBN 9780273732853. Retrieved 9 February 2013.
  3. ^ a b c Nigel Feetham, Grant Jones (2010). Protected Cell Companies: A Guide to Their Implementation and Use (Second ed.). Spiramus Press Ltd. ISBN 9781904905929. Retrieved 9 February 2013.
  4. ^ a b c Erin Arvedlund (2009). Too Good to Be True: The Rise and Fall of Bernie Madoff. Penguin. ISBN 9781101137789. Retrieved 9 February 2013.
  5. ^ a b c d e f g h i Schneeweiss, Zoe (31 December 2008). "Bank Medici Manages Up to $3.2 Billion of Assets Tied to Madoff". Bloomberg. Retrieved 9 February 2013.
  6. ^ Martin de Sa'Pinto (20 January 2009). "Madoff exposure went beyond the ultra-rich". UK Reuters. Archived from the original on 25 April 2016. Retrieved 9 February 2013.
  7. ^ "HSBC to settle Madoff US class action relating to Thema UCITS Fund". HSBC. 7 June 2011.
  8. ^ Groendahl, Boris (12 March 2009). "Austria's Madoff-hit Bank Medici seeks buyers". Reuters. Retrieved 9 February 2013.
  9. ^ Westall, Sylvia (12 January 2009). "Pioneer and wealthy investors hit by Medici-Madoff link". UK Reuters. Archived from the original on 6 March 2016. Retrieved 9 February 2013.
  10. ^ a b Bodoni, Stephanie (21 January 2009). "Madoff Forces 17 Luxembourg Funds to Halt Redemptions". Bloomberg. Archived from the original on 24 February 2013. Retrieved 9 February 2013.
  11. ^ International Currency Review, Volume 34. 2008. Retrieved 9 February 2013.
  12. ^ "Today in the press". RTÉ News. 6 July 2009. Retrieved 9 February 2013.
  13. ^ a b Helyar, John (26 January 2009). "Madoff Enablers Winked at Suspected Front-Running". Bloomberg. Archived from the original on 13 June 2015. Retrieved 5 April 2016.
  14. ^ "Repex Ventures S.A v. Madoff et al; New York Southern District Court". Justia. Retrieved 9 February 2013.
  15. ^ Dearbhail McDonald and Tim Healy (24 January 2009). "Irish firms sue for $1bn cash linked to Madoff fraud case". Independent.ie. Retrieved 9 February 2013.
  16. ^ Larson, Erik (4 December 2009). "Madoff Trustee Says Irish Funds Received $380 Million". Bloomberg. Retrieved 9 February 2013.
  17. ^ "HSBC Withdraws Madoff Settlement Offer After Case Dismissed". Business Week. 24 January 2012. Archived from the original on 7 April 2013. Retrieved 9 February 2013.
  18. ^ Elizabeth Amon. "Citigroup, HSBC, RBS, Rajaratnam, JPMorgan in Court News". Business Week. Archived from the original on 1 December 2011. Retrieved 9 February 2013.
  19. ^ a b c Bodoni, Stephanie. "HSBC Liability for Madoff Losses an Issue After Four Years". Bloomberg. Retrieved 16 November 2013.
  20. ^ Davinia Brennan (4 February 2013). "Supreme Court clarifies scope of discovery". Lexology. Retrieved 20 February 2013.
  21. ^ Bodoni, Stephanie (29 May 2013). "HSBC Settles Thema Fund's Suit Over Madoff-Linked Losses". Bloomberg. Retrieved 16 November 2013.
  22. ^ "HSBC says tighter rules mitigate against Madoff scam as it fights $1.5m damages case - Financial Services News | Business News | the Irish Times - Thu, May 02, 2013". The Irish Times. Archived from the original on 16 May 2013. Retrieved 29 August 2013.
  23. ^ Slater, Steve (6 August 2013). "HSBC made $250m deal in Irish court". Irish Examiner. Retrieved 16 November 2013.
  24. ^ Declan Magennis (30 January 2015). "'Can do' approach heralds a settlement for Madoff investors". Cayman Financial Review. Archived from the original on 21 April 2016. Retrieved 11 May 2016.
  25. ^ Irish Times report, 7 September 2017 (accessed 11 September 2017)