UK law firm Edwin Coe has filed a claim against HSBC UK for the losses caused by its private banking division in the “conception, development, and marketing of a series of Disney films financing schemes known as the Eclipse Partnership”.
International Adviser reported in February 2019 that the bank was already facing legal action, led by Edwin Coe, after investors accused it of “misrepresenting” the film investments.
The 371 investors behind the claim allege that HSBC introduced them “on the false promise” that Eclipse was a genuine opportunity to invest in blockbuster Disney films, and they claim HSBC is liable for fraud.
They are now seeking loss and damages in excess of £1.3bn ($1.6bn, €1.4bn).
Going bankrupt
The scheme consisted in exploiting the rights to a number of the most popular Disney films, but the lawsuit says that none of the rights were ever actively traded or exploited.
Investors were promised returns and legitimate tax deferrals, but they said they only ended up with huge losses and potential liabilities.
According to the claim, HSBC is believed to have collected around £25m in fees for its role in the Eclipse scheme, while some investors have faced bankruptcy or are being hit with tax bills from HM Revenue & Customs (HMRC).
Eclipse was open to investors between 2006 and 2008, and around 750 people are believed to have put approximately £2.3bn towards it, all of whom had to get loans to supplement their investments.
It was a ‘sham’
“It is now clear Eclipse was a passive pass-through model via which the rights to Disney’s films circled back to the studio. Eclipse was a sham investment opportunity,” said David Greene, senior partner at Edwin Coe.
“Although the investment was touted as having the blessing of leading tax counsel, the conduct of these schemes veered away from that advice.
“It appears the investments made by our clients were simply transferred between funder and Disney entities in a circular, self-cancelling fashion.
“It was a risk-free income stream for Disney, HSBC and the lending banks – but financially catastrophic for its unwitting investors. At no point did Eclipse actually exploit, or otherwise trade in, any meaningful film rights of any value from Disney,” Greene added.
Edwin Coe said it expects the trial to be heard in 2021 at the earliest.
IA reached out to HSBC, but the bank declined to comment on the lawsuit.
