Sarasin Alpen (ME) Ltd, which called itself Bank Sarasin Alpen, is being liquidated for failing to pay $35m (£24.2m, €30.7m) in penalty damages to a group of Kuwait investors for mis-selling financial products.
The Bank was formerly a joint venture of between Switzerland’s Bank Sarasin, which owned 60% and Alpen Corporation which held a 40% stake. However, the joint venture has since been discontinued and is no longer linked to J Safra Sarasin, the Swiss-based private bank controlled by the Safra family which operates in Dubai. J Safra Sarasin sold its stake to an undisclosed buyer last year.
The winding up of Bank Sarasin Alpen, which was filed by the company’s creditors as opposed to by the company itself, came to light on the DIFC court’s web site last week.
Mis-sold notes
This case involves the sale of $200m in structured investment products to a wealthy Kuwaiti family between late 2007 and early 2008 by Bank Sarasin Alpen, which has now ceased operations.
“Calling itself Bank Sarasin Alpen, the company promised capital guaranteed products which would pay a minimum guaranteed interest rate,” according to lawyers for the Al Khorafi family.
“Acting on this advice, and facilitated by the company, the Al Khorafi family invested $200m, much of it borrowed against property investments, to invest in these so-called “higher yielding guaranteed” products,” the lawyers said in a statement.
Risky investments
“The products were in fact a series of highly risky leveraged investments based upon the performance of various underlying indices and marketed by Bank Sarasin Limited.
“Bank Sarasin Alpen forged documentation which classified the Al Khorafi family as experienced investors. Forms which the Al Khorafi family had been advised to sign and return, were completed in handwriting by Bank Sarasin Alpen staff purporting to be members of the Al Khorafi family,” they said.
In November 2015 the DIFC court determined that the two banks, Switzerland’s Bank J. Safra Sarasin and Bank Sarasin-Alpen, should pay the Al Khorafi family more than $70m to cover the financial losses resulting from the sale.
The Swiss private bank, Bank J. Safra Sarasin, immediately paid its share of the damages into court pending the hearing of its appeal against the award of damages. However, Bank Sarasin Alpen did not pay its share and had sought a stay of the order to pay the damages which was denied on 18 January 2016. It was ordered to make the payment by 1 February this year and failed to meet this deadline.
The original trial was heard before Sir John Chadwick, a former Judge of the Court of Appeal of England and Wales, and the (now recently retired) Deputy Chief Justice of the DIFC Courts in Dubai.
Lawyers respond
Ghandy Abuhawash, senior partner at Hamdan Al Shamsi, lawyers and legal consultants in Dubai said:
“Our clients are incredibly disappointed that an organisation which held itself out to be a responsible financial institution, called itself a Bank and claimed to be affiliated to a reputable Swiss Bank whose products it marketed, has refused to pay the amounts awarded against it.”
“Bank Sarasin Alpen has fought the judgment with a series of unmeritorious and inconsistent arguments on liability, all of which have been rejected.
“We are particularly concerned that those behind Bank Sarasin-Alpen, who benefited enormously from selling products to customers in this region, are prepared to walk away from their responsibilities. We will now look extremely closely at the actions of the directors of this company and will carefully investigate the actions of the new companies that Alpen Corporation Limited and Bank J. Safra Sarasin Limited have set up.”
