Sigrún Davíðsdóttir's Icelog

Deutsche Bank has studiously tried to hide some transactions with Kaupthing in 2008 – and in December 2016 probably thought it had succeeded when it agreed to settle for €425m to Kaupthing and two now bankrupt BVI companies set up in 2008 by Kaupthing. The story behind these deals figured in two Icelandic court cases and one of them, the so-called CLN case, has now taken an unexpected turn: the Supreme Court has ordered the Reykjavík Country Court to scrutinise the transactions as it reopens the CLN case. But what is Deutsche Bank hiding? “It’s not unlikely that an international bank wants to avoid being accused of market manipulation,” said Prosecutor Björn Þorvaldsson in Reykjavík District Court on October 11.

In early 2008 Kaupthing managers were rightly worried about the sky-rocketing credit default swap, CDS, spreads on the bank; in spring of 2008 the spreads had crept up to 900 points, a wholly unsustainable rate for any bank. According to multiple sources over the years, Deutsche Bank came up with a simple plan: Kaupthing should buy CDS on itself linked to credit linked notes, CLNs, Deutsche Bank would issue. Except Kaupthing should not be seen doing it: finance it, yes – but through two BVI companies owned by trusted clients in deals set up by Deutsche Bank. Thus, the market manipulation was neatly out of sight.

Only later did it transpire that Deutsche Bank was not only the broker in deals it knew were set up to manipulate the market – hence the remark by Prosecutor Björn Þorvaldsson – but it was actually on the other side of the CDS bets, a player in that market. Consequently, the bank profited handsomely, both from fees and from the actual CDS deals.

In the Deutsche Bank universe this unglorious saga of transactions to manipulate the market etc is however not at all true. Yes, Deutsche Bank admits it was the broker but it knew nothing of the purpose of the transactions, had no idea Kaupthing did finance the two BVI companies and certainly was not on the other side of the bets. This is what Deutsche Bank has stated in a London court and in witness statements in criminal proceedings Iceland (where Deutsche Bank is not being charged).

However, outside of the Deutsche Bank universe (and well, probably in some hidden corners inside Deutsche given the email trail that has surfaced in Icelandic court) there is abundant evidence showing the Deutsche Bank involvement. Certainly, Icelandic prosecutors are in no doubt Deutsche Bank was involved in the planning, knew of the Kaupthing funding and made money from the funds.

Kaupthing had poured €510m into the CDS bets. Early on, the administrators of Kaupthing and the two BVI companies eyed an interesting opportunity to claw these funds back. Until December last year, the administrators, in separate actions, have been suing Deutsche Bank in various places over these transactions.

When the legal fights were about to come up in court Deutsche Bank relinquished: to avoid having the whole well-documented saga exposed in court, with evidence running counter to the Deutsche Bank version of the CDS saga, Deutsche Bank finally agreed to pay €425m, around 85% of the millions that went through Deutsche Bank into the CDS schemes.

Intriguingly, in 2010 the Serious Fraud Office, SFO, had its eyes on Deutsche Bank’s CDS transactions with Kaupthing but this case seems to have evaporated as so many of the suspicious deeds in UK banks.

The story of these CDS transactions is a central part in the still on-going so-called CLN case. Kaupthing bankers have been charged for fraudulent lending and breach of fiduciary. Below, the focus is on the role of Deutsche Bank in the CDS transactions – what its real role was and why Deutsche Bank was in the end so keen to settle when nothing in the original 2008 agreements obliged it to pay anything back.

DB’s own version

In June 2012, Kaupthing hf, an Icelandic stock corporation, acting through its winding-up committee, issued Icelandic law claw back claims for approximately € 509 million (plus costs, as well as interest calculated on a damages rate basis and a late payment rate basis) against Deutsche Bank in both Iceland and England. The claims were in relation to leveraged credit linked notes (“CLNs”), referencing Kaupthing, issued by Deutsche Bank to two British Virgin Island special purpose vehicles (“SPVs”) in 2008. The SPVs were ultimately owned by high net worth individuals. Kaupthing claimed to have funded the SPVs and alleged that Deutsche Bank was or should have been aware that Kaupthing itself was economically exposed in the transactions. Kaupthing claimed that the transactions were voidable by Kaupthing on a number of alternative grounds, including the ground that the transactions were improper because one of the alleged purposes of the transactions was to allow Kaupthing to influence the market in its own CDS (credit default swap) spreads and thereby its listed bonds. Additionally, in November 2012, an English law claim (with allegations similar to those featured in the Icelandic law claims) was commenced by Kaupthing against Deutsche Bank in London (together with the Icelandic proceedings, the “Kaupthing Proceedings”). Deutsche Bank filed a defense in the Icelandic proceedings in late February 2013. In February 2014, proceedings in England were stayed pending final determination of the Icelandic proceedings. Additionally, in December 2014, the SPVs and their joint liquidators served Deutsche Bank with substantively similar claims arising out of the CLN transactions against Deutsche Bank and other defendants in England (the “SPV Proceedings”). The SPVs claimed approximately € 509 million (plus costs, as well as interest), although the amount of that interest claim was less than in Iceland. Deutsche Bank has now reached a settlement of the Kaupthing and SPV Proceedings which has been paid in the first quarter of 2017. The settlement amount is already fully reflected in existing litigation reserves and no additional provisions have been taken for this settlement. (Emphasis here and below is mine).

This is Deutsche Bank’s very brief story of the CNL saga and the settlement in the bank’s 2016 Annual Report. – Not admitting anything and yet, for no reason at all judging from the Annual Report, it paid Kaupthing an undisclosed sum, now known to be €425m.

Sigurður Einarsson’s letter to friends and family January 2009: the first tangible evidence of the CDS transactions

As recounted in an earlier Icelog there were rumours soon after the October 2008 banking collapse that Kaupthing had funded transactions connected to the bank’s CDS in order to manipulate the spread, thus lowering the bank’s ominously high financing cost.

At the end of January 2009 former chairman of the Kaupthing board Sigurður Einarsson told his side of the various stories swirling in the media. Yes, it was true that Kaupthing had funded transactions by what he called Kaupthing’s “trusted clients” to influence the bank’s CDS spread but it had done so on advice from Deutsche Bank.

The SIC report April 2010, the CDS story in some details

The story was told in greater detail in the 2010 report by the Icelandic Special Investigations Committee, SIC (p. 26-28, Vol. 2; in Icelandic). It was clearly stated and documented that Deutsche Bank came up with and concocted the plan. Summarised, the SIC recount of the CDS transactions is the following:

Kaupthing set up two BVI companies, Chesterfield and Partridge, for the sole purpose of carrying out the CDS transactions. Chesterfield was owned by three companies, in turn owned by four Kaupthing clients: Antonios Yerolemou, Skúli Þorvaldsson and the fashion entrepreneurs Karen Millen and Kevin Stanford, respectively owning 32 %, 36% and 32%. The Icelandic businessman Ólafur Ólafsson owned Partridge, also through another company.

Kaupthing lent funds to the four companies owning the two BVI companies that acted in the CDS transactions – all the companies were in-house with Kaupthing, which carried out all the transactions. The beneficial owners were only asked for consent to begin with but were not involved in the transactions themselves.

All of the owners were, as Einarsson said in his letter, longstanding and “trusted clients” of Kaupthing. In 2001, Yerolemou, a Cypriot businessman prominent in the UK Cypriot community and a Conservative donor, had sold his business, Katsouris, to Exista, Kaupthing’s largest shareholder and stayed close to Kaupthing, also briefly as its board member. Stanford had a long-standing relationship with Kaupthing as with the other Icelandic banks and Ólafsson was the bank’s second largest shareholder.

Like Einarsson, the SIC report traced the origin of the transactions to Deutsche Bank:

“At the beginning of 2008, Kaupthing sought advice from Deutsche Bank as to how it could influence its CDS spreads. In a presentation in early February, Deutsche Bank advised Kaupthing, for instance, to spend all liquid funds it received to buy back its own short-term bonds in an attempt to normalise the CDS curve. In the summer the idea of a credit-linked note transaction appeared in an email communication from an employee of Deutsche Bank. It states that this would mean a direct impact on the CDS spreads rather than an indirect one, as in the case of buy backs of own notes. It also states that this transaction will be financed. The message concludes by stating that the issue has to be timed right to get the ‘most “bang” for the buck’. In e-mail messages exchanged by Sigurdur Einarsson and Hreidar Mar Sigurdsson following this, the two agree that they do not need to involve pension funds, but that there is ‘no question’ that they should do this. 


Sigurdur Einarsson said that the initiative for the transaction had come from Deutsche Bank. ‘It involved getting parties to write CDSs against those who wanted to buy them. This was to create a supply of CDSs, of which there were none. Because what we saw was happening on the market, or what we thought we saw, was that the screen price was always rising and there were certain parties, certain funds that put in a specific bid, no transaction, raised the bid, no transaction, raised it, raised it, raised it, raised and raised.‘” (As translated in Akers and Anor v Deutsche Bank AG 2012.)

According to the SIC the CLN transactions “can be assumed to have actually made an impact on the CDS spreads on Kaupthing.” The SIC report came up with the total amount lost by Kaupthing on these trades: €510m, all of which had been paid to Deutsche Bank as the broker of the underlying deals.

The administrator of Partridge and Chesterfield also wondered about Deutsche Bank’s role

Further information came up in a London Court in 2012: soon after Kaupthing failed, Partridge and Chesterfield unavoidably went bankrupt; after all, their only assets were the CLN linked to the failed CDS bet. Their administrators, Stephen Akers from Grant Thornton London and his colleague, quickly turned to Deutsche Bank to get answers to some impertinent questions regarding the two companies. When Deutsche Bank was not forthcoming Akers took a legal action demanding from Deutsche Bank documents related to the transactions. A decision was reached in February 2012.

In his affidavit in the 2012 Decision, Akers said: “It is very difficult to see how the transactions made commercial sense for the Companies. This request for information is in part to explore how the Companies might have expected to benefit from the transactions, to identify what the Companies’ purposes and objectives in entering into the transactions were and how the Companies were expected to repay the loans from Kaupthing if there was movement in the market in the ‘wrong’ direction (as transpired). … The Joint Liquidators are keen to understand, through requests for information and documents from key parties, why these particular transactions were entered into by these particular companies. 

46. From the information that the Joint Liquidators have been able to gather about the transactions …, it seems possible that the Companies were involved in a wider package or scheme, although it is too early to comment definitively on the purpose of such scheme, contemporaneous reports and documents suggest that the purpose might have been to manipulate the credit market for Kaupthing.“

In his Decision, Justice Newey holds up the “possibility of market manipulation” quoting the above statement from the SIC report, noting the report’s conclusion “that the CLN agreements “can be assumed to have actually made an impact on the CDS spreads on Kaupthing.””

In the 2012 Decision it’s pointed out that “Deutsche Bank strongly denies any suggestion that it entered into the CLN transactions in order to manipulate the market. In other respects, too, it takes issue with the picture painted in the Icelandic report. Among other things, it says that the CLNs were not in any way unusual or commercially unreasonable transactions; that it was not aware that Kaupthing was itself financing the purchase of the CLNs, if that is what happened; and that it did not act as adviser to Chesterfield, Partridge or Kaupthing.”

DB was right that the CLNs were not in any way unusual – but the CLNs per se were not the problem that drove Akers to collect information but the whole transactions. However, there is abundant documentation, inter alia emails to and from Deutsche Bank etc. to show that Deutsche Bank was indeed aware that Kaupthing was financing the two companies’ bet on the Kaupthing CDS. And Deutsche Bank definitely advised Kaupthing in this set up, again born out by emails.

The “bang for the buck” email, quoted in the SIC report was written by Venkatesh Vishwanathan, a senior Deutsche Bank banker who oversaw the CDS deal with Kaupthing. In his witness statement in the Akers 2012 case he gave his interpretation: “I say the way to proceed would involve ‘hitting the right moment in the market to get the most bang for the buck’ because an investor investing in a CLN product would want the best return and the coupon available over the term of the CLN, should it run to maturity, is set when the CLN is issued. That was why market timing was important. I was not suggesting, as Mr Akers says, that Kaupthing would get ‘bang for its buck’ by Deutsche selling CDS protection.”

Vishwanathan’s interpretation runs contrary to what Akers claimed and other sources support: that the transactions were set up for Kaupthing, via the two companies, in order to influence the market.

DB placed Wishwanatahn on leave in 2015, in autumn 2016 he had sued the bank for unfair dismissal. According to his LinkedIn profile, Wishwanathan now lives in Mumbai (he has not responded to my messages).

Additional evidence: the Icelandic CLN case

In 2014, Sigurður Einarsson, Kaupthing’s CEO Hreiðar Már Sigurðsson and head of Kaupthing Luxembourg Magnús Guðmundsson were charged of breach of fiduciary duty and fraudulent lending to the two BVI companies, Partridge and Chesterfield, causing a loss of €510m to Kaupthing.

The charges (in Icelandic) support and expand the earlier evidence of Deutsche Bank role in the CDS trades. Deutsche Bank made for example no attempt to be in contact with the Kaupthing clients who at least on paper were the owners of the two companies. Deutsche Bank was solely in touch with Kaupthing. When the two companies needed for example to meet margin calls its owners were not averted; Deutsche Bank sent all claims directly to Kaupthing, apparently knowing full where the funding was coming from and who needed to make the necessary decisions.

But who was on the other side of the CDS bets, who gained in the end when the Kaupthing-funded companies lost so miserably?

According to the Icelandic Prosecutor, the three Kaupthing bankers “claim they took it for granted that the CDS would be sold in the CDS market to independent investors and this is what they thought Deutsche Bank employees had promised. They were however not given any such guarantee. Indeed, Deutsche Bank itself bough a considerable part of the CDS and thus hedged its Kaupthing-related risk. Those charged also emphasised that Deutsche Bank should go into the market when the CDS spread was at its widest. That meant more profit for the CLN buyer Chesterfield (and also Partridge) but those charged did not in any no way secure that this profit would benefit Kaupthing hf, which in the end financed the transactions in their entirety.”

DB fees amounted to €30m for the total CDS transactions of €510m.

The oral hearings in the CLN case were in Reykjavík in December last year. I attended the hearings, which further not only supported the story of Deutsche Bank’s involvement but provided ample tangible evidence as witnesses were questioned and emails and other documents projected on a screen.

The side story in the al Thani case

A short chapter in the CDS saga is the fact, already exposed in the SIC report, that Kaupthing had indeed planned with Deutsche Bank to set up yet another company to trade on Kaupthing’s CDS. Kaupthing issued a loan of $50m to Brooks Trading Ltd, via another company called Mink Trading, both owned by Sheikh Mohamed Khalifa al Thani. The purpose was to invest in CLN linked to Kaupthing’s CDS, via Deutsche Bank, identically structured as the CDS transactions through Chesterfield and Partridge. CDS transactions through Brooks were however never carried out.

Sheikh al Thani played a role in another Kaupthing case, the so-called al Thani case; the Sheikh was not charged but the three Kaupthing managers, charged in the CLN case, and Ólafur Ólafsson were sentenced to three to 5 ½ years in prison. The bankers for fraudulent lending, breach of fiduciary duty and market manipulation; Ólafsson was sentenced for market manipulation.

The 2008 last minute CBI loan to Kaupthing

The evidence brought out in the CLN case – the tracing of the transactions, emails, phone calls etc. – shows that the Kaupthing managers were extremely focused on exactly these transactions. Kaupthing was teetering and yet they never wavered from paying to Deutsche Bank, the agreed sums and the margin calls that followed. It almost seemed as if nothing else mattered in their world, a sense further strengthened by some back-dated documents related to the CDS transactions.

The last payments were made just as the bank was collapsing, 7 October 2008; the bank went into administration 8 October. During these last weeks, foreign currency was scarce at the bank in Iceland where the payments originated. On 6 October, prime minister Geir Haarde addressed the stunned nation on radio and television at 4pm, to announce the Emergency Act enabling Icelandic authorities to deal with collapsing banks in an orderly manner. – Hreiðar Már Sigurðsson, then CEO of Kaupthing but only for 48 more hours, has said in court that when he heard of the Emergency Act he knew it was over for the banks.

At noon of 6 October, Geir Haarde and the governor of the Central Bank, CBI, Davíð Oddsson, who both knew the Emergency Act was coming later that day, agreed the very last lending to the banks: Kaupthing would be given a loan of €500m. This, to permit Kaupthing to meet payments the Bank of England and the FSA were demanding as a guarantee for the bank’s UK subsidiary, Kaupthing Singer & Friedlander.

The reasons for this loan have never been completely clarified (see Icelog on this story): documents and an audio of the phone call between Oddson and Haarde remains classified in spite of valiant attempt by the Icelandic media to unearth this evidence. The CBI has promised a report on the Kaupthing loan “soon” but so far without a publication date.

Whatever the motivation, the CBI issued the loan directly to Kaupthing without securing it would be used as promised, i.e. to strengthen Kaupthing’s UK subsidiary. Instead, part of it was used 7 October when Kaupthing paid, via the two BVI companies, the last €50m CDS transactions to Deutsche Bank.

This is how much the CDS transactions mattered to the Kaupthing managers who never, not even in the mid of the cataclysmic events engulfing the bank these early days in October 2008, took their eyes off the CDS transactions with Deutsche Bank.

When the Deutsche Bank December 2016 agreement surfaced…

In January 2016, the Reykjavík District Court acquitted the three Kaupthing managers of the fraudulent lending and breach of fiduciary duty they had been charged with in the CLN case. In February this year, the Office of the Special Prosecutor (now Office of the District Prosecutor, encompassing the earlier OSP and other duties), appealed that decision to the Supreme Court.

In March 2016, I reported on Rúv (in Icelandic) that Deutsche Bank had indeed come to an agreement with Kaupthing: on-going legal cases, mentioned in Deutsche Bank’s annual reports 2015 and 2016 (but not in earlier reports), had now been settled with Deutsche Bank agreeing to pay Kaupthing more than €400m.

The agreement had been sealed in December 2016. Kaupthing made no big deal of the millions accruing from Deutsche Bank – no press release, just silence.

I pointed out that what Deutsche Bank had stated in the 2012 court case in London was not in accordance with other sources. Also that the bank had mentioned the Kaupthing claims in its 2015 Annual Report but stated it had filed defence and continued to defend them.

I concluded that Deutsche Bank 1) refuted it knowingly participated in transactions knowing set up to mislead the market 2) refuted that Deutsche Bank planned the transactions 3) denied knowing Kaupthing was itself financing the transactions aimed at lowering its CDS spreads. Further, I pointed out that statements from the Prosecutor in the CLN case showed that Deutsche Bank was not only the broker in these transactions but was actually on the other side of the bet it set up for Kaupthing and gained handsomely when Kaupthing failed.

I did at the time send detailed questions to Deutsche Bank regarding the bank’s statements in the 2012 London court case and its version of the case in its annual reports. Deutsche Bank’s answer to my detailed questions was only that bank was not commenting “on specific aspects of this topic,” only that “Deutsche Bank has reached a settlement over all claims relating to credit-linked note transactions referencing the Icelandic bank Kaupthing. The settlement amount is already fully reflected in existing litigation reserves.”

In my email exchange with Deutsche Bank I mentioned that this matter had wider implications – Deutsche Bank has stated in court and in its annual reports that it had nothing to do with the CDS trades except selling the CLN related to it. Thus, it could be argued that the stance taken by Deutsche Bank, compared to abundant evidence, has been misleading and that has much wider implications than just being a matter between Deutsche Bank and Kaupthing. – The answer was, as before: settlement reached, no further comments.

It’s interesting to note that at the time Deutsche Bank reached an agreement of paying €425m to Kaupthing it was struggling to reached its required capital level, looking for €8bn. That did allegedly force the bank to finish several outstanding cases, the Kaupthing case being one of them.

Why did Deutsche Bank change its mind and meet 85% of the Kaupthing claims?

Following my March reporting on the agreement between Deutsche Bank and Kaupthing where Kaupthing did indeed recover around 85% of its CDS transactions with Deutsche Bank the three Kaupthing managers charged in the CLN case, now fighting an appeal by the Prosecutor, turned to the Supreme Court asking for the case to be dismissed: according to them, the basis of the claims had been the €510m loss to Kaupthing – and now that there was apparently hardly any loss the case should be dismissed.

Their demand for dismissal came up at the Supreme Court 11 October where the Court stipulated that in order to understand the demand for dismissal the Court needed to get a deeper understanding of the Deutsche Bank agreement with Kaupthing. The District Prosecutor had obtained a copy of the agreement handed to the Court but not made public in its entirety.

During the oral hearings that day Prosecutor Björn Þorvaldsson maintained that the agreement did not change the charges in the CLN case to any substantial degree: the loans had been illegal, no matter if the money was then much later clawed back. He said that according to the agreements in 2008, Deutsche Bank had been entitled to the funds and Kaupthing had no claim for clawing them back.

So what did then change, why did Deutsche Bank decide to meet the Kaupthing claims and pay back €425m of the original €510m it got from the CDS transactions?

The Prosecutor said one could only guess: 1) Perhaps Deutsche Bank wanted to hide that the Kaupthing loans to the two companies did indeed end up with Deutsche Bank 2) Did Deutsche Bank see it as harmful to the bank’s reputation that the details of the transactions would be exposed in a court case? 3) Was it accusation of being part of market manipulation that irked Deutsche Bank?

As Þorvaldsson said in court 11 October: “It’s not unlikely that an international bank wants to avoid being accused of market manipulation.”

The Supreme Court ruling on issues related to the Deutsche Bank Kaupthing agreement

The Supreme Court decided on the dismissal request 19 October. According to the Decision, Deutsche Bank signed two agreements in December 2016 regarding the 2008 CDS transactions. One was an agreement with the two companies involved, Chesterfield and Partridge. The other one is with Kaupthing.

The aim was to effectively end three court cases where Kaupthing was suing Deutsche Bank in addition to cases brought by the two companies against Deutsche Bank. According to the agreement the two companies and Kaupthing agreed to put an end to their legal proceedings against Deutsche Bank – and Deutsche Bank concurred to pay €212.500.000 to Kaupthing and the same amount to the two companies, in total €425m. Further, the agreement stipulated that Kaupthing (as the largest creditor of the two companies) would get 90% of the Deutsche Bank payment to the two companies. In total, Deutsche Bank paid €425m to end all dispute, whereof over €400m would go to Kaupthing.

The thrust of the arguments, on one side the Prosecutor, on the other side the three defending bankers was that the Prosecutor said that issuing the loans was the criminal deed, that’s what the three were being charged for – whereas the three defendants claimed that since Deutsche had now paid most of the transactions back it showed that the bank felt legally obliged to pay on the basis of the 2008 contracts.

In its Decision the Supreme Court scrutinised the final settlement of the CDS transactions concluded at end of October 2008, which indicated that Deutsche Bank did indeed not feel obliged to pay anything back to the owners of the CLNs. Same when Icelandic police interrogated two (unnamed) Deutsche employees: nothing that indicated Deutsche Bank thought it was obliged to pay anything back.

The Supreme Court concluded that based on the information at hand on the December 2016 settlement it was neither clear “why the bank (DB) agreed to issuing these payments, what the arguments were nor what material was the basis for the claims by Kaupthing and the two companies in their legal actions against Deutsche Bank. It is also not clear what was the nature of the (December 2016) payments, if they related to earlier contracts (i.e. the 2008 contracts) or if they were damages and if they were damages then what was their nature.

Based on this, the Supreme Court then decided against dismissal, as demanded by the three bankers, sending the case back to the Reykjavík District Court for a retrial where questions regarding the December 2016 settlement should be clarified in addition to the charges brought by the District Prosecutor.

This means that although Deutsche Bank settled with Kaupthing and the two companies the actions of Deutsche Bank will be scrutinised by Icelandic Court, probably already next year.

A short revision of dodgy Deutsche Bank transactions

As other international banks, Deutsche Bank has had a lot to answer for over the last few years and paid billions in fines for its rotten deeds. Contrary to Iceland, bankers in the UK and the US, have mostly been able to wipe the cost of their criminal deeds on shareholders (and why on earth have shareholders such as as pension funds and other public-interest organisations been so patient with banks’ criminal deeds?)

In April 2015 Deutsche Bank settled LIBOR manipulation cases with US authorities, paying $2.175bn and £226.8m to the UK Financial Conduct Authority, FCA as mentioned in the bank’s 2015 Annual Report.

In January this year it paid £163m to the FCA, the largest fine ever paid to the FCA, for “serious anti money-laundering controls falings” in the so-called mirror trades, where $10bn were sent out of Russia to offshore accounts “in a manner that is highly suggestive of financial crime.” At the same time, US authorities fined the bank $425m for the same offense, pointing out that “Deutsche Bank and several of its senior managers missed key opportunities to detect, intercept and investigate a long-running mirror-trading scheme facilitated by its Moscow branch and involving New York and London branches.” – Many years ago, a source said to me Deutsche Bank really should be called Russische Bank.

In May, the US Fed fined Deutsche Bank $41m “for failing to ensure its systems would detect money laundering regulations.”

In additions, there have been fines for violating US sanctions. Lastly, there is focus on Deutsche Bank and its tight connection to US president Donald Trump. And so on and so forth.

Summing it up – seen from Iceland: why Deutsche Bank would want to settle

In this context it is interesting that Deutsche Bank has decided to pay €425m to Kaupthing, a high sum in any context, even in the context of fines Deutsche Bank has had to pay over the years.

From all of these various sources it is easy to conclude as did the State Prosecutor in October that yes, one reason why Deutsche Bank would want to bury it involvement in Kaupthing’s CDS trades in the summer of 2008 is that this looks like a market manipulation by a major international bank. Further, Deutsche Bank has questions to answer regarding its own involvement in the market, i.e. it did not only broker the CDS deals, knowing full well who financed the two BVI companies, but it was actually a player in that market, making a lot more from the deal than only the fees.

Updated 14.6.2018: a retrial has been ordered, the case will come up next winter. This time, there will also be some focus on DB’s role in order to understand the context better though neither DB nor any DB bankers are charged. 

Follow me on Twitter for running updates.