A £1.3bn claim has been launched by 371 investors against HSBC for its role in a series of Disney film financing schemes that they allege were fraudulent.
They were told they were going to exploit the rights to a number of Disney’s most popular films, including Pirates of the Caribbean 2 & 3, National Treasure 2, Enchanted, Underdogs and Confessions of a Shopaholic, but none of the rights to any of these films were in fact ever to be actively traded.
The claimants, represented by London law firm Edwin Coe, allege they were induced to invest on the false promise that Eclipse represented a genuine opportunity to invest, and ended up instead with huge losses and potential liabilities.
Edwin Coe said Eclipse was open to investors between 2006 and 2008 and was marketed as a legitimate, tax efficient, investment.
Some 750 individuals invested £2.3bn, and all obtained loans to supplement their investment, the interest on which was to be covered by the eventual return on their investment.
The firm said HSBC was believed to have received over £25m in fees for its role in conceiving, developing and marketing the scheme.
In contrast, many investors have entered bankruptcy and/or are facing HMRC demands for millions, sometimes as much as 10 times their original investment, on non-existent tax relief or deferrals.
David Greene, the senior partner of Edwin Coe, said: “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.
“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.”
The lead claimant is retired policeman Chris Upham. He said: “My wife and I were attracted by an opportunity to invest in films which had the backing of major banks, Disney and City tax lawyers.
“It seemed a great opportunity and exciting to be involved with blockbuster films. My wife and I invested £25,000 of our own money in 2007.
“It was marketed to us by professionals and seemed totally above board. It is beyond disappointing to discover that the investment was not as it had been purported to be, In simple terms, we have been deceived. To find out that a bank like HSBC was sitting behind all this increases the anger we feel at having been cheated.”
We have approached HSBC for comment.