Elliott Says Santander’s Use of Signal Messaging App Hampers Lawsuit

By Irene García Pérez | July 16, 2024

Elliott Investment Management has alleged that Banco Santander SA’s practice of using an auto-deleting messaging platform, in this instance to discuss a take-private deal, is hampering its long-running lawsuit against the bank.

The hedge fund sued Santander affiliates and board members of Santander Consumer USA Holdings Inc. in 2022 for allegedly rigging the $12.7 billion take-private buyout of its US auto loan business to keep potentially billions worth of pandemic-related profits in the Spanish bank’s hands.

During pre-trial information exchanges, Elliott now says it uncovered “significant destruction of relevant evidence” relating to Signal messages sent around the time of the 2021 deal, according to a motion filed last month. Both Santander Chair Ana Botin and Mahesh Aditya, the chief executive officer of Santander Consumer USA Holdings, had “automatic deletion for at least some conversations” enabled, Elliott says it was told by Santander in December.

Neither Botin nor Aditya are part of the class-action.

“We are confident we have met all our legal requirements and disclosure obligations,” a spokesperson for Santander said. “As this is now a matter for the court it would not be appropriate to comment further.” An Elliott spokesperson declined to comment.

The filing offers fresh insight into the bank’s deliberations over the contentious buyout, which was a key part of Santander’s push into higher-growth businesses. Elliott’s motion asks the Delaware judge to impose a heightened burden of proof for any testimony that contradicts available documents given the alleged loss of relevant evidence.

Botin and her colleagues frequently discussed Max —the acquisition’s code name — via Signal, the Delaware Chancery Court filings claim. A dedicated messaging group used to discuss the transaction had the auto-delete feature switched on, Elliot says, which is the app’s default setting.

While the use of messaging apps has been banned among the Spanish bank’s corporate and investment bank employees, Signal remains authorized for occasional non-sensitive internal conversations for other parts of the business, according to a person familiar with the matter who asked not to be identified discussing company policy. Signal is viewed as more secure than WhatsApp, the person said.

Elliott’s allegation is another sign of the risks banks increasingly face by using such messaging apps. Regulators have been scrutinizing the practice in a bid to ensure firms better monitor and save communications, with the Securities and Exchange Commission imposing fines on a wide range of firms for the use of messaging apps by traders and dealmakers.

The messages in question represent a fraction of the documentation produced for the proceedings. Santander has provided over 127,000 documents and more than 20 witnesses as part of the case, according to a person familiar with the matter.

A five-day trial is set to start in Sept. 16. The case is Santander Consumer USA Holdings Shareholder Litigation, 2022-0689 (Delaware Chancery Court).

Top photo: A window reflects signage outside a bank branch of Banco Santander SA in London, U.K., on Tuesday, Aug. 15, 2017.

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