Thursday, December 1 2022

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A new book, Iceland’s Secret: The Untold Story of the World’s Biggest Con, offers an insider’s perspective on the investigations following the 2008 financial crash, as well as a stark warning that we didn’t do enough against financiers who have actively participated in market manipulation and fraud; that another financial meltdown could very well be on the horizon.

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The book is written by Jared Bibler, the lead investigator for Iceland’s regulator, the Financial Supervisory Authority (FME), who had himself worked as an asset manager at Landsbanki only to quit days before the crash following shady orders he would have given by his relatives. superior: he was asked, on three occasions, to transfer some 5 million euros each time to an unknown account in Norway, without papers. When he learned that his manager’s boss was asking questions, and that manager was blaming Jared for the situation, he quit on October 3, 2008. The bank then went bankrupt on October 7.

After being taken in by the FME, he uncovered a massive market manipulation scheme that had been carried out by the Kaupthing bank.

“Digging deeper, Bibler and his team discovered that, every year since 2004, Glitnir, Landsbanki and Kaupthing had engaged in illegal large-scale stock support operations,” says a review of the Financial Times book. These securities frauds involved the banks making huge loans to shell companies based in the British Virgin Islands, which had been set up for the sole purpose of secretly buying up the banks’ shares and inflating their stock prices, with only the actions themselves as collateral – or variations on that theme.

This behavior, Jared argues, was not just endemic in the Icelandic financial sector, but throughout Icelandic society, and persisted years after the fact.

“He resigned from FME in November 2011, after his team was dismantled under his orders as the regulator’s appetite to prosecute criminal bankers began to wane,” the study continued. “He believes ancillary activities around illegal equity support programs have been swept under the rug, and some of the worst crimes – including the alleged use of fake invoices to cheat Iceland’s central bank out of its foreign exchange reserves – persisted in the industry for at least six years after the banking crisis. He also believes that, as many guilty bankers were released early with their wealth and status largely intact, the chilling effect of their hard-earned sentences has been reduced.

The book ends on a note of warning; that little has changed significantly in the Icelandic financial sector and that another crash may be only a matter of time.

“Despite the devastation of 2008, the dragon of badly corrupt financial markets has not yet been cast down,” Jared writes. “…Iceland between 2004 and 2008 serves as a preview of future attractions for major world markets. Today, we find ourselves in the equivalent of the 1930s, convinced that the Great War is over… We wrongly qualify 2008 as the Global Financial Crisis, as if there will only be one, despite the fact that GFC II is almost likely on the horizon. We are on the verge of a ticking time bomb.


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