Kaupthing chief arrested on suspicion of market abuse
The former chief executive of failed Icelandic bank Kaupthing has been arrested on suspicion of falsifying documents and market manipulation.
Kaupthing's collapse in October 2008 cost the British Treasury £2.5bn in compensation, and hundreds of UK savers with its Isle of Man branch are still waiting to be fully compensated.
The bank's actions are under investigation by the UK Serious Fraud Office and a special inquiry team in Iceland over claims of share ramping and big loans to related parties.
Hreidar Mar Sigurdsson, the former co-chief executive of Kaupthing, was on Thursday being held in police custody, awaiting a bail hearing this morning. He has previously denied any wrongdoing over Kaupthing's collapse.
Iceland's special prosecutor is looking into more than 20 cases of potential criminal activity connected to Kaupthing and the country's other failed banks.
A special report by Iceland's parliament showed Kaupthing secretly owned almost half of its own shares.
One case of alleged market manipulation revolves around the sale of a 5pc stake in Kaupthing to a company called QFinance linked to a Qatari investor.
Several weeks before the bank collapsed, a press release said the sale showed that "Kaupthing's position is strong and we believe in the bank's strategy and management". Only after the bank failed did it emerge that the Qatari investor "bought" the stake using a loan from Kaupthing itself and a holding company associated with one of its employees.
Investigators are also looking at a seemingly similar purchase of a 2.5pc stake in Kaupthing by London-based property entrepreneurs Moises and Mendi Gertner.
Two-thirds of Kaupthing's clients were based in London, including high-profile investors such as Robert Tchenguiz, Simon Halabi and the Candy Brothers, who all lost substantial sums in the crash.
After Kaupthing's loan book was leaked on to the internet last August, it showed key shareholders and owners were the bank's main borrowers. Mr Tchenguiz, who was a director of Kaupthing's largest shareholder, had the biggest debt of €1.74bn.
Following the disclosure, Mr Sigurdsson defended the bank's practices but made a public apology.
"Mistakes were made," he said. "I'm obliged to offer my apologies to the bank's shareholders, lenders and employees. I should have prepared the bank better for the storm that hit it."
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