Nine Arrested in U.K., Iceland in Fraud Probe of Kaupthing Bank

The U.K. Serious Fraud Office and police in Britain and Iceland arrested nine men after searching homes and businesses in London and Reykjavik during a probe of the collapse of Iceland’s Kaupthing Bank hf.

Seven men, aged 42 to 54, were arrested in London after two businesses and eight residences were searched, while two men, aged 42 and 43, were arrested in Reykjavik in a coordinated operation, the SFO said today in a statement. The Financial Times reported that two of the men arrested were U.K. entrepreneurs Vincent and Robert Tchenguiz.

U.K. prosecutors in December 2009 opened an investigation into the possibility fraud occurred at Kaupthing prior to the Icelandic lender’s October 2008 collapse. Kaupthing was the last of Iceland’s three biggest banks to collapse that year.

The agency, at the time, said it was especially interested in the bank’s efforts to attract U.K. investors to a high-yield deposit account called Kaupthing Edge. More than 30,000 people and companies in the U.K. invested in Kaupthing Edge, the SFO said. Iceland took control of Kaupthing after the bank couldn’t get enough short-term funding.

A call to the office of the Tchenguiz's R20 Ltd. wasn’t answered and an e-mail didn’t receive an immediate response.

Photographer: Arnaldur Halldorsson/Bloomberg

U.K. prosecutors in December 2009 opened an investigation into the possibility fraud occurred at Kaupthing prior to the Icelandic lender’s October 2008 collapse. Close

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Photographer: Arnaldur Halldorsson/Bloomberg

U.K. prosecutors in December 2009 opened an investigation into the possibility fraud occurred at Kaupthing prior to the Icelandic lender’s October 2008 collapse.

To contact the reporter on this story: Erik Larson in London at elarson4@bloomberg.net.

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