Hundreds of investors have filed collective action against HSBC over a Disney financing scheme which they allege was a ‘sham investment opportunity’.
Some 371 investors are bringing group action against HSBC UK Bank for the losses caused by its role in the conception, development, and marketing of a series of Disney film investment schemes known as the Eclipse Partnerships, which ran from 2006 and 2008.
The claimants allege they were induced to hand over money on the false promise that Eclipse represented a genuine opportunity to invest in popular Disney films and that HSBC is liable for fraud. The current claimant group is seeking over £1.3bn in loss and damages and the litigation is being funded by Therium Capital Management.
David Greene, senior partner at Edwin Coe LLP, which is representing the claimants, said Eclipse was a ‘passive pass-through model via which the rights to Disney’s films circled back to the studio’.
‘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,’ he said.
Many investors are said to have entered bankruptcy as a result of the scheme, with some facing enormous tax bills from HM Revenue and Customs.
In 2016, the Supreme Court dismissed an appeal from Eclipse 35 in favour of HMRC. While the Eclipse partnership said it was trading film rights, HMRC argued it was actually a tax avoidance scheme.