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Wealth Bulletin – Geneva’s public prosecutor said he has launched a criminal investigation into allegations that Banco Santander SA’s hedge-fund unit misled investors when it funneled their money into Bernard L. Madoff’s Ponzi scheme.
The formal investigation was opened following a complaint by Geneva Partners, an independent investment fund that bought financial products from Santander’s Geneva-based hedge-fund unit, Optimal Investment Services SA.
Dario Zanni, Geneva’s public prosecutor, said the inquiry would look at whether Optimal’s former chief executive, Manuel Echeverria, did the fact-finding claimed in the firm’s documents. "We have some suspicion about his [work]," Mr. Zanni said. "We are not sure he was doing his job compliant with his duties."
USA Today – A Spanish banking giant that channeled $3 billion of its clients’ funds to Bernard Madoff has agreed to repay more than $235 million it withdrew from the confessed Ponzi scheme architect in the months before the scam collapsed in December.
Pending federal bankruptcy court approval, the deal announced Tuesday by a hedge fund investment subsidiary of Banco Santander would boost the amount recovered to help repay Madoff’s victims past the $1.2 billion mark.
The settlement would return 85% of the total sought from Spain’s largest bank by Irving Picard, the court-appointed trustee seeking Madoff’s assets for redistribution to thousands of victimized investors worldwide. Picard has so far issued more than $100 million in repayment commitments, a fraction of the total losses.
Wall Street Journal – Spain’s Banco Bilbao Vizcaya Argentaria SA said Thursday it has decided to pull out of the hedge-fund market, shutting down Proxima Alfa Investments and exiting two other joint ventures.
Spain’s second-biggest bank by assets said the pullout was the result of tough market conditions and in anticipation of potential effects from the financial crisis on the hedge-fund industry. The closure affects around 100 employees, and represents less than 1% of the bank’s €130 billion ($165 billion) in assets under management, said a BBVA executive, whose name the bank declined to release.
The global financial crisis has cooled a once-blossoming romance between banks and hedge funds, with some banks experiencing how being too closely associated with the industry could taint their image. BBVA’s larger rival Banco Santander SA recently took a hit to its reputation from news that its fund-of-hedge-funds manager Optimal Investment Services had an exposure of €2.3 billion to Bernard Madoff’s alleged Ponzi scheme. It has since said it would shut down Optimal.
In addition to Proxima, BBVA is winding down Altitude and exiting BBVA Partners, two smaller alternative-investment managers. Most of the 2,000 or so clients that are invested in the 24 funds affected by the closure are institutional investors, the BBVA official said.
With $930 million in assets under management, Proxima Alfa was BBVA’s biggest bet on hedge funds. The bank invested $1 billion of its own funds when it formed Proxima in 2006 as a $3 billion joint venture with hedge-fund company Vega Asset Management.
Bloomberg - Banco Santander SA’s hedge fund unit used risk software that according to its developer may have “waved red flags” about Bernard Madoff investments.
“You definitely would have seen it,” Riskdata SA Chief Executive Officer Ingmar Adlerberg said in a phone interview from Paris. Many of the company’s 80 customers have thanked it for flagging risks linked to Madoff, he said. He refused to name them or comment specifically on Santander.
Santander offered on Jan. 27 to pay 1.38 billion euros ($1.8 billion) to private banking clients hit by Madoff-related losses through the Spanish bank’s Optimal Investment Services hedge fund arm. Geneva-based Optimal said Riskdata’s FOFiX product was key to “quantitative risk analysis” for hedge fund investments in a 30-page due-diligence questionnaire filed last April with the Alternative Investment Management Association.
