Deutsche Bank AG v Sebastian Holdings Inc

Posted on 01/12/2013 · Posted in Expert Witness, Financial Litigation, Investment

An interesting case where Deutsche Bank sued Sebastian Holdings for about $530m to cover losses incurred in currency trading during the Credit Crunch in 2008. Sebastian Holdings counterclaimed that the bank had engaged in improper conduct and terminated trades which otherwise would have realised substantial profits. The Defendant estimated that the cost of the margin calls cost the fund as much as $8bn.

Sebastain Holdings is an investment fund run by Norwegian businessman Alexander Vik. He testified at the court hearing in June that he had not authorised a former trader, Klaus Said, who worked for the firm, to place deals of that magnitude and it had been the responsibility of Deutsche Bank not to accept the orders. The size of Sebastian Holdings claims made this one of the largest cases to be heard in the English Commercial courts. In the defence to the counterclaim Deutsche Bank stated that Mr Vik knew of the risks that were being taken and estimated that the $8bn losses were “ambitious”.

The case put forward by Sebastain holdings was undermined at trial as the allegations were said to bear “all the hallmarks of being fabricated in order to make a case” as described by Mr Justice Cooke in his judgement. Concerning the evidence of Mr Vik, he stated that “I have concluded that in some respects he was simply dishonest”.

In the judgement Sebastian Holdings was ordered to pay Deutsche Bank $236m and subsequently was required to meet 85% of the bank’s legal costs which were estimated at £60m. Payment of £32m plus VAT needed to be made within two weeks of the judgement. The judge commented that he “had warned the parties very early on about issues which did not pass the “red face test” and the possibility of indemnity costs being awarded in respect of them” and hoped that “it may discourage other litigants from pursuing hopeless points”. The counterclaim for compensation was dismissed.

Link: Judgment in Deutsche Bank AG v Sebastian Holdings [2013] (EWHC) 3463 (Comm)

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