Yesterday, Spain’s Banco Santander became the first institution to offer to repay victims in the alleged Madoff fraud, as it attempted to avoid lawsuits. FT reports that Santander offered to “pay back 100 per cent of the investments made in the Optimal Strategic US Equity fund, which was wholly invested with Mr Madoff, to individual private banking clients but not to institutional investors. In exchange, clients would have to agree not to sue.”
The repayment of this €1.38bn would be in the form of Santander preference shares, paying an annual 2 per cent, which could be bought back by the bank after 10 years. FT reports that the difference between the €1.38bn offer and the €2.33bn total client losses initially announced by Santander includes investments by institutional clients for which no offer is being made and the nominal returns from Mr Madoff that apparently never existed.
Although Santander gave no official explanation for excluding institutional investors from the offer,
bank officials drew a distinction between private clients advised by Santander and institutions that could perform their own due diligence and that invested in Optimal’s US equity fund precisely because it was a route into Mr Madoff’s business. “They are grown-ups,” said one. “They knew it was Madoff.”