The Global Financial Crisis was fuelled by dodgy lending and the packaging of multiple dodgy loans (sub-prime loans) as “consolidated debt vehicles” (CDV) which, magically, became AAA rated securities in doing so. Eventually, confidence was lost that the debts that many banks had on their books could ever be repaid, triggering the crisis. Understandably, some private and corporate investors have sought redress for losses that they sustained when investing in secure assets that turned out to be anything but. National authorities have also sought to investigate criminality and malpractice occurring within their jurisdictions, but this has typically resulted in the imposition of fines rather than incarcerations.
HSBC was founded in Hong Kong in 1865 and is now the seventh largest bank in the world. It has some 38 million customers and its assets exceed $2.3 trillion and is headquartered in London. Just by way of comparison, the assets that the bank holds are comparable to the GDP of the UK.
HSBC has settled claims by the US Department of Justice stemming from the sale of its mortgage-backed securities in the run-up to the Global Financial Crisis (during 2005 to 2007), agreeing to pay it $765 million whilst neither admitting or refuting the charges against it. A statement from the bank’s US arm by its head, Patrick Burke noted: "The US management team is focused on putting historical matters into the rear-view mirror and completing the turn-around of HSBC's US operations".
The Department of Justice said that HSBC misled investors about the quality of the securities (CDV) they offered, deliberately overlooking the underlying risks that multiple individual mortgages could fail within the bundles. The US Attorney for the District of Colarado, Bob Troyer said: "HSBC made choices that hurt people and abused their trust. If you make choices like this, beware. You will pay."
During the period in question, HSBC handled $24 billion worth of residential mortgage-backed securities via its US subsidiary. It also paid other fines already in 2016 worth $400 million stemming from its activities in servicing home loans.