Santander on Tuesday night offered private clients to repay 100 per cent of the investments made in the Optimal Strategic US Equity fund, which was wholly invested with Mr Madoff. In exchange, clients would have to agree not to sue.The repayment of the investments of â?¬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.
The difference between the amount of the offer and the â?¬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.
Santander gave no official explanation for its exclusion of institutional investors from the offer. But bank officials drew a distinction between private clients advised by Santander and institutions that could perform their own due diligence and that invested in Optimalâ??s US equity fund precisely because it was a route into Mr Madoffâ??s business.
Optimal Investment Services, Santanderâ??s Geneva-based fund of hedge funds management company, meanwhile, announced that it would wind up seven of its 12 funds through orderly redemption and termination following a sharp rise in withdrawal requests.
The repayment would take place on condition that the clients agreed not to pursue litigation and not to sell the notes, as well as promising to keep Santander as their provider of banking services.
