KSFIOM DAG, 2008 – 2020: a brief history

Kaupthing, Singer & Friedlander Isle of Man (KSFIOM) had operated as such for just over three years when it collapsed suddenly on 9 Oct 2008, plunging around 10,000 depositors and life company bondholders in limbo with (unlike their retail counterparts in the UK) no sign of a bail-out and no prospect of receiving any timely compensation (see ‘Key Events’ below).

Of around 7,500 retail depositors, almost half were former depositors of the Isle of Man subsidiary of the Derbyshire Building Society whose accounts had been transferred to KSFIOM when their chosen bank was taken over by the Icelandic bank Kaupthing in December 2007. Others came from the Isle of Man arm of the UK bank Singer & Friedlander, taken over by Kaupthing in 2005, and yet others were enticed by the attractive interest rates offered by the internet ‘Edge’ accounts launched by Kaupthing in early 2008.

Many were British expatriates, working or retired overseas, for whom opening an account on the UK mainland had become almost impossible. They included business people, civil servants, teachers, development workers and environmentalists, some of whom - nearing retirement - had placed their life-savings, or in some cases the proceeds of the recent sale of their home abroad, in anticipation of an imminent return to the UK. For them the impact of the overnight loss of any access to their hard-earned savings was dramatic, leading in some cases to despair and even suicide. Also affected were bondholders in life insurance companies which had invested in KSFIOM. Yet others were Isle of Man residents who used KSFIOM as their high street bank.

The Depositors Action Group (DAG) was formed almost immediately through the creation of a website set up by an enterprising depositor to provide mutual support to depositors and with the stated objective of obtaining 100% return of all KSFIOM depositors’ funds. Thanks to generous donations from many depositors, DAG was able to secure the legal services of Edwin Coe LLP. After a long and arduous journey lasting almost 12 years, our ambitious objective was finally achieved in 2020. We believe the DAG played a significant part in this remarkable result, but sadly it came too late for those who died along the way or who never recovered from the violent disruption of their lives brought about by the greed of reckless bankers. This ‘obituary’ page is dedicated to their memory.

Any depositors with agreed claims who believe they may not have received all that is due to them should skip to “further notes for depositors” below.

Key Events

KSFIOM was formed in August 2005 following the acquisition in August 2005 of the long established London-based merchant bank Singer & Friedlander by the Icelandic bank Kaupthing - despite the strong reservations of the then CEO of Singer & Friedlander Tony Shearer who, his dire warnings that in his view (& that of several of his senior colleagues) Kaupthing was not ‘fit & proper’ to run a British bank having gone unheeded, promptly resigned; following reconstruction, the renamed sister banks KSFUK & KSFIOM became direct subsidiaries of Kaupthing hf Iceland (Khf).

On 21 Dec 2007, KSFIOM acquired Derbyshire Offshore, the Isle of Man subsidiary of The Derbyshire Building Society. In a glossy brochure sent to Derbyshire depositors in November, Kaupthing was described as ‘a Northen European bank .... operating in 14 countries including all the Nordic countries (Denmark, Faroe Islands, Finland, Iceland, Norway and Sweden), Luxembourg, the UK, the US, Dubai, Qatar and the Isle of Man’. It is hard to believe this was anything but a deliberate attempt to conceal its true parentage at a time when concerns about the Icelandic banks were already circulating among those in the know. The launch in January 2008 of Kaupthing’s internet savings account ‘Edge’ resulted in a third group of depositors, enticed by attractive highly competitive interest rates.

In the spring of 2008, in response to concerns of the Isle of Man regulator, most of KSFIOM’s funds then deposited in Iceland were transferred to its sister bank in the UK. But this did nothing to prevent the inevitable collapse of KSFIOM after KSFUK – which remained exposed to Khf which declined to support it – entered administration on 8 Oct 2008 and KSFIOM was accordingly placed in provisional liquidation the following day.

The Isle of Man Depositors’ Compensation Scheme (DCS), which promised compensation up to £50,000, turned out - in contrast to the UK Compensation Scheme - to be unfunded and the IOM Treasury spent many months attempting to devise and then to impose an alternative ‘Scheme of Arrangement’ (SOA) which was vigorously resisted as unsatisfactory by the DAG at a series of Court hearings, at the last of which – on 9 April 2009 – the Deemster judged it was not possible for the Court to reach a definite decision in the matter and that, being in his words ‘not incontravertibly bound to fail’, it should be put to a vote of creditors. Meanwhile advances totalling up to £10,000 per depositor made available through two ‘early payment’ schemes (EPS) in January & February 2009 did little to ease the suffering of those who had lost their life-savings, some of whom were now homeless and living on the generosity of family & friends.

The SOA was finally rejected in a creditors’ vote in May 2009, following which a winding up order was passed by the Isle of Man High Court on 29 May 2009. Michael Simpson and Peter Spratt of Pricewaterhouse Coopers were confirmed as Joint Liquidators at a further meeting of creditors held on 7 July 2009 and the Compensation Scheme could at last be triggered. With the support of DAG, four retail depositors were elected to the seven-member Committee of Inspection constituted to oversee the liquidation and in early September 2009 - almost a year after the collapse - up to £50,000 was finally paid to those who claimed in the DCS and a first dividend of about 25p/£ was declared by the Liquidators.

In Nov 2014, following the sale of its outstanding claim in KSFUK, the 10th KSFIOM dividend brought the total distribution to 100% of ‘agreed claims’ – something no-one could seriously have imagined in the dark days of 2008/9. This did not however include any ‘deferred interest’ due to some depositors as a result of a 5% cap imposed on uncapitalised interest as of 9 Oct 2008. Over the next 5 years, the remaining assets of KSFIOM were gradually realised and outstanding claims resolved, resulting in a small surplus available for distribution as interest.

The final distribution, comprising any deferred interest in full and statutory interest amounting to 1.608p in the £, was paid by the Liquidator on 31 March 2020, either directly to creditors or via the DCS (see “further notes for depositors” below). The Final Report to Creditors was issued on 6 Aug 2020, the Liquidator was released by the Court on 13 October 2020 and KSFIOM was formally dissolved on 27 October 2020, with monies held by the Liquidator, representing unclaimed dividends, to be paid into the Court.

Further notes for depositors

The cut-off date for claiming in the liquidation was 5 September 2018, after which no new claims could be accepted. If you have an agreed claim but have not received the final distribution then:

EITHER your address and/or bank details have changed since your last payment and you did not inform the Liquidator.

OR you claimed in either the DCS and/or one or both of the early payment schemes (EPS), and did not complete & return the required (DCS) form. All details for this are on the DCS website which – as of writing (Jan 2021) – remains open to receive late claims. https://www.dcs.im/

Note that even if you never claimed in DCS (and thus received all previous dividends directly from the Liquidator), but had previously claimed in EPS1 or EPS2, the final distribution will have been paid to the DCS and initially passed on to you only after completion of their form. It appears however that in November 2020 the DCS began sending cheques to the last known address for DCS/EPS claimants who had failed to confirm or update their details.

If you remain in doubt as to your status, you should contact PWC (Isle of Man): https://www.pwc.com/im/en/about-us/contact-us.html

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