Last bank crash case back in court

17.02.2021 - 14:13
Mynd með færslu
 Mynd: RÚV
The main hearing began this morning at the Landsréttur appeals court in the last outstanding banking crash case. Hreiðar Már Sigurðsson, Sigurður Einarsson, and Magnús Guðmundsson stand accused of breach of trust over loans made to overseas companies owned by Kaupþing customers shortly before the bank’s collapse.

The funds were used for complicated trades in credit default swaps in Kaupþing itself, in the hope of reducing pressure on the ailing bank. The debtors were set to keep all profits, if any emerged. The defendants were acquitted by the District Court.

The lower court ruled it had not been proven the defendants abused their positions for profit. The appeal is the last outstanding case related to the banking crash of 2008/9, excluding those that have been re-opened. 

The hearing is set to last three days. The first day is being spent listening to recordings of statements made at Reykjavík District Court during the earlier trial. Defendants will also have the chance to add information. The first statement was from Hreiðar Már, and lasted two hours. The testimony from the lower court is shown on two screens in the Landsréttur courtroom. 

Investigation into the case started shortly after the crash and charges were brought in 2014. The three men were acquitted in 2016, but the Supreme Court annulled that decision in 2018. A year later, Hreiðar, Sigurður, and Magnús were acquitted again. Prosecutors appealed that verdict to Landsréttur. 

The case centres on credit default swaps in Kaupþing, the spread of which had increased rapidly in 2008 and the Kaupþing leaders worked with Deutsche Bank to bring down again. A concerted effort to trade, in order to lessen the pressure, followed. Offshore companies owned by Ólafur Ólafsson, Kevin Stanford, and other prominent customers received currency market loans of 510 million dollars (roughly 40 billion krónur at the time, or 66 billion at today’s rate). All the money was lost when Kaupþing went bankrupt, though its resolution committee later managed to recover a large proportion of the funds after a battle with Deutsche Bank. 

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Alexander Elliott
Project manager