The Icelandic Financial Supervisory Authority (FME) is investigating the ISK 25 billion (USD 277 million, EUR 188 million at the time) stake in Kaupthing Bank acquired by Sheik Mohamed bin Khalifa Al-Thani, the brother of the Emir of Qatar, shortly before the bank collapsed last fall.
Kaupthing’s headquarters in Reykjavík. Copyright: Icelandic Photo Agency.
According to Fréttabladid’s sources, the Unit for the Investigation and Prosecution of Economic and Environmental Crimes under the National Commissioner of the Icelandic Police suspected that there were dubious circumstances surrounding the acquisition and notified the FME of their suspicion in November.
Stöd 2 television news reported last weekend that Kaupthing had lost ISK 37.5 billion (USD 294 million, EUR 221 million) because of the acquisition.
Ólafur Thór Hauksson, a recently-appointed special prosecutor in charge of investigating the banking collapse, would not comment on the FME’s investigation since he does not officially assume his post until February, other than saying, “I assume that, in general, cases will be sent from the FME and resolution committees to my office.”
Other parties are also looking into this case. “We will discuss it [today], reviewing the information that was provided, but I cannot say anything else at this stage,” said CEO of the OMX-NASDAQ Nordic Stock Exchange in Iceland Thórdur Fridjónsson.
According to Fréttabladid, the Stock Exchange has not ruled out that Al-Thani’s acquisition of the share in Kaupthing Bank was, in fact, a wash sale.
The Stock Exchange received an announcement from Kaupthing on September 22, 2008 that Al-Thani acquired a five percent stake in the bank. The stake was registered to the holding company Q Iceland Finance.
It now appears that the bank itself had financed the acquisition.
According to Morgunbladid, the acquisition was allegedly undertaken through two companies registered in the Virgin Islands, which lent money to a third company, which again lent it to Q Iceland Finance. The companies in the Virgin Islands allegedly received funds from Kaupthing collateralized with stocks in the bank.
One of the Virgin Islands companies is allegedly owned by Ólafur Ólafsson, the second-largest shareholder in Kaupthing through his company Kjalar.
Al-Thani is then supposed to have made a forward currency contract with Kaupthing, which was meant to secure him an exchange-rate profit and, in turn, pay for his stake in the bank. This trade allegedly went through Kaupthing in Luxembourg.
Click here to read more about Al-Thani’s stake in Kaupthing.
