Kaupthing Accuses Hedge Funds of Market Manipulation Skip to content

Kaupthing Accuses Hedge Funds of Market Manipulation

Sigurdur Einarsson, Chairman of the Board for Kaupthing Bank, has accused four foreign hedge funds of instigating a systematic attack on the Icelandic financial market and Icelandic banks.

Einarsson told Fréttabladid that they have gone to great lengths to profit from taking short positions in stocks and credit default swaps (CDS). He also contends that this assault has been defused by taking action against the hedge funds who intended to turn a profit by driving the banks to bankruptcy. Click here to read the original article on visir.is.

Einarsson explained that Kaupthing Bank has been in contact with international media representatives in an effort to explain the systematic attack undertaken by these speculators and the methods they have used to effect it.

[The text in this space was removed after a phone call from Andrew Honnor of Tulchan Communications, PR representative for one of the hedge funds.]

According to Einarsson, these hedge funds, among others, have taken short positions in CDS, and then systematically contacted foreign media representatives and financial analysts with negative questions and comments about the Icelandic economy and its banks.

This triggered rising CDS spreads and created substantial profits for these short positions. According to financial newspaper Markadurinn’s source, these kinds of deals may yields profits in the tens to hundreds of billions of ISK (in context, ISK 100 billion is about USD 1.4 billion, EUR 890 million).

Einarsson concedes that many indications suggest that the funds’ plans have succeeded in the short term but that they will inevitably fail in the long term. He states that as CDS spreads drop so will the profits from short position-taking, added to the fact that the media and analysts are now more cautious about news on Iceland than before. “You can’t fool people over and over again,” Einarsson said.

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