May 26, 2009 / 5:04 PM / 10 years ago

UPDATE 1-Banco Santander unit settles Madoff claim

* Santander pays $235 mln settlement for fund unit

* More than $1.2 bln recovered so far for Madoff victims (Adds details and quotes on settlement)

NEW YORK, May 26 (Reuters) - Banco Santander SA (SAN.MC), which fed investment adviser Bernard Madoff before his worldwide swindle was revealed, agreed to pay $235 million to settle a legal claim against one of its units, the trustee winding down the Madoff firm said on Tuesday.

The agreement was made for claims against Santander’s Geneva-based hedge fund Optimal Investment Services, bringing to $1.225 billion the amount collected so far to distribute to Madoff’s defrauded customers, trustee Irving Picard said in a statement.

The settlement, which represents 85 percent of the claim against Optimal by the trustee winding down Bernard L. Madoff Investment Securities LLC, was reached without the need to sue the firm in U.S. Bankruptcy Court.

Spanish prosecutors are investigating Santander’s relationship with Madoff’s firm.

Madoff, 71, pleaded guilty in March to orchestrating an investment scheme of up to $65 billion over at least two decades. He is jailed awaiting sentencing in June and he is expected to spend the rest of his life in prison.

“I am very pleased that we reached such a favorable settlement with Optimal and that Optimal will pay more than $235 million to resolve the claims against it,” Picard, a New York lawyer, said in a statement. “We hope that other entities against which we have claims will likewise come forward to settle those claims for the benefit of all of Madoff’s victims.”

The trustee has asked a U.S. Bankruptcy Court judge in New York to approve the settlement on June 16.

Picard’s job is to collect as much money as possible under the auspices of the Securities Investor Protection Corp to distribute to the thousands of investors defrauded by Madoff. (Reporting by Grant McCool; Editing by Andre Grenon)

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