Trust Updates Archive

Madoff Banco Santander Banks Trusts HSBC Optimal Due Diligence Transfer Agent Custodian Investment Funds Fast Settlement Offer in Madoff-Related Lawsuit, Fiduciaries Named as Defendant

(Jan. 28, 2009--Chicago, IL) -- Banco Santander wasted no time offering to settle a lawsuit alleging that investment funds it promoted to customers were almost exclusively invested in Bernard Madoff's ponzi scheme, which collapsed recently with losses estimated at $50 billion. The lawsuit against Banco Santander, Spain, was filed in U.S. federal court on January 26, seeks class action status, and alleges damages of some $3 billion.

Less than 48 hours after plaintiffs filed their complaint, Banco Santander offered to reimburse clients some $1.8 billion, which, according to public sources, the bank plans to raise through issuing preferred stock.

Legal counsel for plaintiffs have called the bank's offer "very significant" and "a step in the right direction."

According to the complaint, Banco Santander should have known that the Optimal funds [registered in the Bahamas], which it was promoting to international client base, were invested in Bernard Madoff's funds. While Banco Santander is the primary focus of the lawsuit, the complaint also alleges inadequate due diligence by Optimal's investment adviser [affiliated with the funds] and HSBC as registrar and transfer agent and as custodian of the funds. HSBC Securities Services and HSBC Institutional Trust Services are named defendants.

While the offer by Banco Santander's may be good news for plaintiffs, legal sources warn the fast settlement will prompt similar litigation against other banks.

For more on this topic, see the upcoming issue of Trust Regulatory News.

No statement in this issue is offered as or should
construed as legal opinion or advice

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