NEW YORK (Bloomberg) - HSBC Holdings plc asked a judge to dismiss a $9 billion lawsuit by the trustee liquidating Bernard Madoff’s firm, saying he is not allowed by law to bring such cases on behalf of the confidence man’s former customers.Irving Picard, the trustee, sued HSBC and a dozen so-called feeder funds for $9 billion in December, accusing them of aiding Madoff’s fraud. Yesterday, Picard and HSBC, which acted as custodian for the funds, argued in front of US District Judge Jed Rakoff in Manhattan over whether the case should be dismissed.Picard is mistakenly suing HSBC for damages on the theory that it had a duty to investigate the Madoff fraud and that it hurt all of the con man’s investors by not doing so, said Thomas Moloney, a lawyer for the bank.“HSBC owes no duty to these customers,” Moloney told Rakoff. “HSBC was not the watchman” for all Madoff investors, he said.Rakoff said he will rule on HSBC’s request by the end of July. The dispute pits Europe’s biggest lender against the lawyer liquidating Bernard L. Madoff Investment Securities LLC, which perpetrated the largest Ponzi scheme in US history. Picard has filed 1,000 lawsuits in bankruptcy court to recover $90 billion from banks and former Madoff investors who allegedly profited from the fraud.HSBC, arguing that Picard has gone far beyond his role as liquidator of the Madoff firm, asked Rakoff in February to decide whether the trustee can bring claims such as aiding and abetting a fraud, and can sue on behalf of customers in a type of class action. Rakoff in May said he would temporarily take the case to decide non-bankruptcy issues, and he ordered London-based HSBC to file an argument for dismissal.Picard faces similar challenges in district court from JPMorgan Chase & Co, which he sued for $6.4 billion, and UniCredit SpA, a defendant with Bank Medici AG and its founder Sonja Kohn in a $59 billion lawsuit.According to HSBC, brokerage trustees are appointed “for the liquidation of the business of the debtor”, not to file lawsuits seeking damages for customers. Picard also has no right to sue HSBC in the name of customers who have no claims against the bank, it said in a filing this month.Picard argued the reverse. Picard argued the reverse. “The trustee has standing to assert common law claims to seek damages,” he said in a filing this month. A brokerage trustee “has exclusive power to take possession of customer property and the duty to marshal and return such property to its owners”.Picard said in April he had recovered $7.6 billion for investors, or about 44 percent of an estimated $17 billion in principal lost in the Ponzi scheme since Madoff’s 2008 arrest. Most of that isn’t available for distribution, he has said. He and his law firm, Baker & Hostetler LLP, have charged more than $175 million in fees.Picard’s December complaint alleged that HSBC ignored signs that Madoff’s investment business was fraudulent and didn’t take steps to protect investors.If HSBC had reacted “appropriately” to such warnings, the Ponzi scheme “would have collapsed years, billions of dollars and countless victims sooner,” Picard said in a December statement.The bank said it lost almost $1 billion of its own money investing in feeder funds, “a fact that clearly undermines the trustee’s claim that HSBC was on notice of Madoff’s fraud”.Earlier this month, HSBC agreed to pay $62.5 million to settle a group lawsuit in New York, filed by investors in a fund that lost money with Madoff while it acted as custodian. Madoff, 73, is serving a 150-year sentence in a federal prison in North Carolina after pleading guilty.