OSP, dubious transactions and repo
The house searches conducted today by the Office of the Special Prosecutor at Straumur, MP Bank, Landsbanki, Landsvaki (a money market fund owned by Landsbanki) and Central Bank of Iceland seem to be directed against two issues: the transactions of tens of billions of kronur from CBI to Landsbanki, at the behest of Landsbanki – and transactions in Landsvaki after the fund was closed down. All this seems to have been happening on or around October 6 2008, two days before Landsbanki was taken over by the FME, the Icelandic Financial Services Authority.
These transactions all seem to be related to repo transactions that all three banks, Kaupthing, Landsbanki and Glitnir, were involved in via smaller financial institutions. Landsbanki’s repo in question were done with Straumur and MP Bank. The OSP has indicated that the investigation, at least in part, focuses on whether Straumur and MP Bank were favoured over other creditors when it was clear that the bank was facing bankruptcy. Also, if money was being directed where it shouldn’t go.
Special prosecutor Olafur Hauksson said to the Icelandic media today that tens of billions of kronur had been moved from CBI to Landsbanki at the order of Jon Thorsteinn Oddleifsson who then worked at Landsbanki. There have long been rumours in Iceland that there were streams of money directed in unnormal directions during these fateful days in October 2008 but it’s never been clarified what actually happened. The OSP also seems to be wondering.
Four former Landsbanki employees were taken into custody today, Oddleifsson, Stefan H Stefansson who was chairman of Landsvaki and two others. All have been released tonight. Sigurjon Arnason, the bank’s CEO is still in custody and was being questioned today.
The fact that OSP staff entered the CBI with a search warrant underlines the gravity of the matter. Today, my sources couldn’t think of any Central Bank in any Western country that has been searched by a prosecutor. However, the bank underlines that none of its staff is being investigated for any misconduct.
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