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Deutsche Bank Wins $8 Billion Sebastian Suit on Margin Calls

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Deutsche Bank, based in Frankfurt, said in a statement that the court found that Sebastian Holdings’s allegations were “based on fabricated evidence and false testimony.” Photographer: Ralph Orlowski/Bloomberg

Nov. 8 (Bloomberg) -- Sebastian Holdings Inc., the investment fund run by Norwegian businessman Alexander Vik, lost a lawsuit against Deutsche Bank AG claiming the lender’s 2008 margin calls cost him as much as $8 billion.

Judge Jeremy Cooke said in a ruling today that Sebastian Holdings didn’t have any valid claims and should pay the bank about $236 million. The dispute stems from losses suffered by Vik’s fund at the height of the global financial crisis.

Deutsche Bank asked for about $530 million to cover losses on Sebastian’s currency trading as markets tumbled late in 2008, and liquidated the fund’s positions. Vik sued saying the bank’s improper conduct led to the termination of trades that would have made him billions of dollars.

Vik testified in June that he hadn’t authorized a former Sebastian trader, Klaus Said, to risk so much of his money and it was Deutsche Bank’s responsibility to stop him. The losses were Vik’s “worst nightmare” and left him wanting to puke, according to e-mails and phone calls cited in the 12-week trial.

The damages sought by Sebastian made the case one of the largest ever brought in a U.K. commercial court, Deutsche Bank said in court documents. It argued Vik knew about the risks being taken and called his estimate of lost profits “ambitious.”

Fabricated Evidence

Deutsche Bank, based in Frankfurt, said in a statement that the court found that Sebastian Holdings’s allegations were “based on fabricated evidence and false testimony.” Judge Cooke said in a 400-page ruling that the evidence Vik gave at trial was “simply dishonest.”

Sebastian said in an e-mailed statement it may appeal the decision. It said the judge found Deutsche Bank had been grossly negligent in dealing with the fund’s transactions, and made mistakes in the margin calls.

“Those findings against one of the largest banks in the world –- supposedly a highly regulated and properly run institution – are very serious,” Sebastian Holdings said.

Sebastian’s lawyer, David Railton, told Cooke today that Deutsche Bank had given misleading evidence and the fund shouldn’t have to pay all of its legal costs.

“Your lordship has found the bank maintained a false and dishonest case” for about three years, before changing its arguments ahead of the trial, he said.

The case is: Deutsche Bank AG v. Sebastian Holdings Inc., High Court of Justice, Queen’s Bench Division, Commercial Court, 09-83.

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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