Spanish savers lose EUR 2.2 bln from US fraud

15th December 2008, Comments 0 comments

The collapse of the pyramid scheme run by NY broker Bernard Madoff could cost Spanish investors more than EUR 2.2 billion, report newspapers in Spain.

MADRID – The collapse of a pyramid scheme run by a Wall Street broker could cost Spanish investors well over USD 3 billion (EUR 2.2 billion), Madrid dailies said Saturday.

Most of the cash was put into a fund managed by leading Spanish bank Santander, the reports said, but added that other banks were also exposed.

US authorities announced the arrest Thursday of Bernard Madoff, 70, who allegedly confessed to employees that he had been running a so-called Ponzi scheme, or pyramid fraud, which had collapsed with losses exceeding USD 50 billion.

The daily ABC, quoting financial experts, said that "a large proportion of Spanish banks invested their clients' funds in Madoff products".

It published a table indicating that Santander's Optimal Fund was hit to the tune of USD 3.091 billion, while the financial daily Expansion put the figure even higher, at USD 3.2 billion.

Santander, Europe's second biggest bank, declined comments on Saturday.

It had been seen as enjoying relatively good health, having avoided some of the problems in the US home loan derivatives market that have sunk many of its peers.

The bank announced in October that its third quarter net profit rose 4.3 percent to EUR 2.2 billion, adding that it was on track for record full-year profit despite an abrupt economic slowdown at home and global financial turbulence.

ABC said that another fund manager, M&B Capital Advisor, was exposed to the amount of USD 558 million through investing with Madoff, while Expansion's estimate was EUR 700 million euros.

Madoff reported to the US Securities and Exchange Commission this year that his private investor advisory business - the focus of the alleged pyramid scheme - was managing more than USD 17 billion dollars in assets.

The implosion of the scheme was likely triggered when nervous clients asked to withdraw funds, as they have been demanding from hedge funds around the world.

[AFP / Expatica]

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