Santander billions at risk in Wall St investment scam

Banking giant Santander’s clients had more than £2bn (€2.23bn) in disgraced Wall Street supremo Bernard Madoff’s investment funds, it emerged today.

Europe’s second-largest banking consortium, which owns Abbey and Bradford & Bingley, confirmed the amount, which reports said was mostly in the Optimal Strategic US Equity fund.

And Nomura, Japan’s largest securities company, said today it had £204m (€227m) at risk.

Meanwhile the list of investors who say they were duped in one of Wall Street’s biggest frauds continued to grow, from a Jewish youth charity in Boston to major banks as far afield as Zurich.

Britain’s Nicola Horlick, nicknamed “Superwoman” while a fund manager at Societe Generale, is said to have reported that three funds – £16.5m (€18.4m) – of her listed Bramdean Alternatives were invested with Madoff’s company.

Around the world, investors who sunk cash into former Nasdaq stock exchange chairman Madoff’s investment pool spent the weekend calculating how much exposure they might have.

Madoff, 70, was arrested on Thursday after, prosecutors said, admitting to a £33bn (€36.85bn) scheme to defraud investors.

The alleged victims span from the super rich to pensioners and powerful financial institutions and charities. Some investors claim they have been wiped out, while others are still likely to come forward.

According to court documents, Madoff told his employees he was “finished”, he had “absolutely nothing”, “it’s all just one big lie” and it was “basically, a giant Ponzi scheme”. He is on £6.6m (€7.37m) bail.

A criminal complaint filed with the Manhattan court said Madoff told senior employees of his firm on Wednesday that he had blown more than £33bn (€36.85bn) with fraudulent financial moves.“

The FBI said family members turned Madoff in after he confessed his fraud to them.

“There were a lot of very sophisticated people who were duped, and that happens a great deal when you’ve had somebody decide to be unscrupulous,” said Harvey Pitt, a former chairman of the Securities and Exchange Commission, a regulator in charge of monitoring investment funds like the one Madoff operated.

“It isn’t just the big investors. There’s a lot of charitable and foundation money involved in this, which is the real tragedy.”

The assets of Bernard L Madoff Investment Securities were frozen on Friday in a deal with US government regulators and a receiver was appointed to manage the firm’s financial affairs.

Reports from Florida to Minnesota included profiles of ordinary investors who gave Madoff their money. Some had been friends with him for decades, others were able to invest because they were a friend of a friend.

They told stories of losing everything from £26,500 (€29.596) to an entire nest egg worth well over £670,000 (€748,000).

Some of Europe’s biggest banks joined Santander in acknowledging that they, too, were exposed to Madoff’s investment fund.

Switzerland’s Reichmuth & Co said the private bank had £218m (€243m) at risk. It told investors that they “sincerely regret” being affected.

French bank BNP Paribas estimated its exposure Madoff’s fund could lead to £311m (€347m) in losses.