US--Madoff-Settlement

A Spanish bank that was among the biggest losers in the Bernard Madoff swindle has cut a deal to avoid a legal brawl with the trustee trying to unwind the massive Ponzi scheme.

The settlement, announced Tuesday, calls for Banco Santander to pay $235 million to resolve potential legal claims over withdrawals a subsidiary made from its investments with Madoff in the 90 days before the fraud collapsed.

In exchange, the trustee has agreed to recognize that Santander’s hedge fund subsidiary, Optimal Investment Services, lost far more in the scam than it withdrew.

Two funds managed by the Geneva-based firm had a net loss of $1.55 billion.

Official recognition of that loss will allow Optimal to eventually recover a large share of whatever money is available for Madoff’s victims.

Counting the millions that Santander has now agreed to contribute, that pool of reimbursement assets is now worth about $1.2 billion.

The settlement, which still needs to be approved by a U.S. court, represents the latest step Santander has taken to resolve its entanglements in the case.

About 93% of the bank’s clients have already signed on to a separate settlement in which the bank agreed to refund all of their lost principal.