Judge Bars Madoff Fraud Claims Against Santander

Jun 6 2012 | 10:12am ET

A U.S. judge has tossed several claims against Spain's Banco Santander over Bernard Madoff feeder funds run by its hedge fund unit, Optimal Investment Management.

U.S. District Judge Shira Scheindlin in New York ruled that a two-year-old Supreme Court decision bars the effort to recover losses on the Optimal Strategic U.S. Equity Fund. The Supreme Court ruling, National Australia Bank v. Morrison, bars federal securities fraud lawsuits covering foreign securities traded abroad.

Optimal investors argued that because Madoff claimed to trade on the New York Stock Exchange, their investments should be protected. The only problem, according to Scheindlin, is that Madoff never actually made the trades. Therefore, the lawsuits "failed to overcome the presumption against the extraterritorial reach" of U.S. securities laws.

Scheindlin did allow the investors to continue to pursue other fraud and negligent misrepresentation claims against Santander and Optimal.

Investors in the Optimal fund, which had all of its money with Madoff, lost some US$3.1 billion in the fraud. Santander three years ago offered US$1.82 billion to investors to settle the matter.


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