Europe’s second- biggest bank by market value, may drop after saying its hedge fund unit invested 2.33 billion euros ($3.1 billion) of client funds with Bernard Madoff, who allegedly ran a Ponzi scheme that cost investors $50 billion.
Santander’s Optimal Investment Services unit placed money with Madoff through its Optimal Strategic U.S. Equity fund, the Spanish lender said in a statement yesterday. France’s BNP Paribas SA may lose 350 million euros and Swiss private bank Reichmuth & Co. could have $330 million of losses as Madoff’s scheme reaches victims across the Atlantic Ocean. “People are going to take it badly in the market,” said Alberto Espelosin, who helps manage the equivalent of $7.7 billion at Zaragoza, Spain-based Ibercaja Gestion. “It’s not Santander’s own money, and they’re not to blame, but of course it will be taken as something negative.” Santander, based in the Spanish city of the same name, lost 53 percent of its market value this year. Madoff, 70, who had advised the U.S. Securities and Exchange Commission on how to regulate markets, was arrested Dec. 11 and charged with operating what he described as “one big lie.”