Kaupthing fraud investigations continue in Iceland and UK

kaupþingKaupthing Bank’s relations with foreign investors are being investigated in Iceland and the UK – especially Sheikh Hamad bin Khalifa Al Thani’s “purchase” of a five percent stake in the bank in the lead up to its collapse.

Both Britain’s Serious Fraud Office and Iceland’s Special Prosecutor into the banking crash are investigating the sale which was used heavily at the time to prove how much trust new foreign investors had in Kaupthing. Closer examination revealed that the deal did nothing to strengthen the bank’s capital position and the bank did not give out any new shares to the sheikh – instead selling him bonds in the bank. What investigators are still trying to find out is whether the bonds, bought on a loan from Kaupthing itself, were purchased from other investors or if the bank had previously been trying but unable to sell them off.

The trade deal saw al Thani borrow ISK 12.8 billion from Kaupthing against personal risk. The same amount was also loaned out from a company owned by Olafur Olafsson – meaning that the Qatari’s investment was around ISK 26 billion. When Kaupthing collapsed and the bonds became worthless, al Thani had to reimburse Olafur Olafsson’s company. However, another company of the sheikh’s received a loan payment of USD 50 million at the same time – which was ISK 6.4 billion, or roughly ISK 12.8 billion at the post crash weakened exchange rate.

The whole deal appears to have been carried out to protect the sheikh’s finances while also conveniently moving money around the world and appearing to enjoy the trust of a major Qatari investor. It now seems likely that al Thani had little real trust in Kaupthing at all, but was willing to own a stake in the bank at no personal risk.

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