Spanish Bank to Pay $235 Million for Funneling Clients’ Money to Madoff Scheme

Banco Santander has agreed to pay $235 million to settle threatened legal claims that the bank funneled about $8 billion of its clients’ money into the massive Ponzi scheme run by disgraced money manager Bernard Madoff.

Irving Picard, the court-appointed trustee overseeing dissolution of Madoff’s former brokerage firm, had threatened to sue Banco Santander for contributing to Madoff’s $65 billion investment fraud. According to Picard, Santander had 17 million euros of capital invested in Madoff’s scheme.

The client funds were steered to Madoff through the bank’s Geneva-based hedge fund unit, Optimal Investment Services, officials said.

By law, Picard can file “claw back” actions seeking return of funds that were with withdrawn from Madoff’s firm in the 90 days before it filed for bankruptcy. Other banks accused of delivering funds to Madoff’s fraudulent investment programs previously have agreed to repay some clients’ money.

The money to be paid by Santander brings to about $1.2 billion the amount Picard has secured for victims of Madoff’s investment scam. More than $116 million already has been paid out to 237 former Madoff clients who lost money.

With the settlement with Santander in place, the Optimal funds will be added to the pot of money for claims against Madoff’s estate, which total about $1.5 billion, officials said. Madoff pleaded guilty in March to fraud charges and is awaiting sentencing on June 29. He could face up to 150 years in prison.

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