Madoff's alleged $50 billion fraud costs Spanish savers US$3b

Investors scrambled to assess potential losses from an alleged $50 billion fraud by Bernard Madoff, a day after the arrest of the prominent Wall Street trader. Most of the cash was put into a fund managed by leading Spanish bank Santander, the reports said, but added that other banks were also exposed.

US authorities announced the arrest Thursday of Bernard Madoff, 70, who allegedly confessed to employees that he had been running a so-called Ponzi scheme, or pyramid fraud, which had collapsed with losses exceeding 50 billion dollars.

The daily ABC, quoting financial experts, said that "a large proportion of Spanish banks invested their clients’ funds in Madoff products." It published a table indicating that Santander’s Optimal Fund was hit to the tune of 3.091 billion dollars, while the financial daily Expansion put the figure even higher, at 3.2 billion.

Santander, Europe’s second biggest bank, was making no comment on Saturday. Prosecutors and regulators accused the 70-year-old, who was chairman of the Nasdaq Stock Market in the early 1990s, of masterminding a fraud of epic proportions through his investment advisory business, which managed at least one hedge fund.

Hundreds of people, investing with him through the firm’s clients, entrusted Madoff with billions of dollars, industry experts said.

"Madoff’s investors included captains of industry, corporations -- some of which are publicly traded -- that used Madoff almost as a high-yielding cash management account, endowments, universities, foundations and, importantly, many high-profile funds of funds," said Douglas Kass, who heads hedge fund Seabreeze Partners Management.

"It appears that at least $15 billion of wealth, much of which was concentrated in southern Florida and New York City, has gone to ’money heaven,’" he said.

The bank announced in October that its third quarter net profit rose 4.3 percent to 2.2 billion euros, adding that it was on track for record full-year profit despite an abrupt economic slowdown at home and global financial turbulence.

ABC said that another fund manager, M&B Capital Advisor, was exposed to the amount of 558 million dollars through investing with Madoff, while Expansion’s estimate was 700 million euros (930 million dollars).

Madoff reported to the US Securities and Exchange Commission this year that his private investor advisory business -- the focus of the alleged pyramid scheme -- was managing more than 17 billion dollars in assets.

The implosion of the scheme was likely triggered when nervous clients asked to withdraw funds, as they have been demanding from hedge funds around the world.