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Iceland: Supreme Court Convicts Bankers in Market Manipulation and Fraud Case

(Nov. 10, 2016) On October 6, 2016, the Icelandic Supreme Court handed down a judgment in the Kaupthing case, in which nine bank officials were convicted of fraud and market manipulation in connection with the Icelandic banking crisis of 2008 when the Kaupthing bank bought its own stock in order to keep its value artificially high. (Case No. 498/2015 (Oct. 6, 2016), Supreme Court of Iceland website; Iceland Finds All Guilty in Banker Market-Abuse Case, ICELAND MONITOR (Oct. 6, 2016).)

Nine Kaupthing officials, ranging from a board member, the CEO of the Luxembourg branch, and a member of the loan committee to traders, were convicted of the financial crimes, although only eight of them received prison sentences. Björk Thorarinsdottir, the member of the loan committee, did not receive a prison sentence, nor did Magnus Gudmundsson, the former CEO, receive any additional prison sentence to the one he had already received from the Al-Thani case. (Id. at 223.) The Al-Thani case was a case in which Kaupthing officials let Sheikh Mohammed Bin Khalifa Bin Hamad Al-Thani of Qatar buy shares in the Kaupthing bank using capital that he had loaned from the bank. Gudmundsson had already been sentenced to four and a half years in prison as a result of his involvement in the Al-Thani case. (Id.) Hreidar Mar Sigurdsson, who was previously convicted and sentenced to five and a half years in prison for his involvement in the Al-Thani case, was sentenced to another six months in prison, making his total prison sentence six years. (Id.) The Kaupthing officials were convicted of fraud and market manipulation, and the Supreme Court increased the prison sentences. (Elin Hofverberg, Iceland: Update: Supreme Court Increases Jail Sentence for Kaupthing Bank Director and Shareholder, GLOBAL LEGAL MONITOR (July 2, 2015).)

In both cases, the Kaupthing officials were convicted under the General Penal Code (Almenn hegningarlög) and the rules on market abuse found in the Icelandic Securities Act (Lög um Verðbréfaviðskipti). (Almenn hegningarlög, No. 19 (Feb. 12, 1940, as last amended Apr. 9, 2013), Althingi (Iceland’s Parliament) website; General Criminal Code No. 19/1940 (Feb. 12, 1940, as amended up to Mar. 1, 2004), Iceland Ministry of the Interior website; Lög um Verðbréfaviðskipti, No. 8 (June 26, 2007, as last amended effective Apr. 11, 2013), Althingi website; Act on Securities Transactions, No. 108/2007 (as amended through Mar. 17, 2009), Iceland Ministry of Industries and Innovation website.)