The former chief executive and chairman of Kaupthing, the failed Icelandic bank, have both been sentenced to at least five years in prison as the Nordic island continues its crackdown on the financiers that almost bankrupted it.

The sentences were given for fraud and market manipulation in a case that relates to the acquisition of a 5 per cent stake in Kaupthing in September 2008 – just days before its collapse – by Sheikh Mohammed Bin Khalifa Bin Hamad Al Thani of Qatar.

The Reykjavik district court sentenced Hreidar Mar Sigurdsson, Kaupthing’s former chief executive, to five and-a-half years in prison while Sigurdur Einarsson, the ex-chairman, received a five-year sentence. Both are expected to appeal.

Iceland, almost uniquely in the western world, has launched criminal cases against the men who used to lead its three main banks that collapsed after the global financial crisis in 2008 after collectively becoming 10 times the size of the island’s economy.

Olafur Hauksson, Iceland’s special prosecutor, who was previously a small-town policeman, first gained the conviction of the former boss of another failed bank, Glitnir, a year ago. He brought charges against top managers at the last of the three big failed banks, Landsbanki, in March.

Together Kaupthing, Glitnir and Landsbanki accounted for 90 per cent of Iceland’s financial system and collapsed after a lending spree that included loans to local businessmen to buy prize assets abroad, such as the London-based toy shop Hamley’s and property in New York.

The case against the Kaupthing managers came about after it was revealed the bank had lent Sheikh Mohammed the money to buy his 5 per cent stake.

The Kaupthing case was mirrored by a UK regulatory investigation into Barclays, the UK bank that avoided state aid in 2008 through two cash calls. Barclays said in September it would contest a £50m fine given by the UK Financial Conduct Authority for failing to disclose £322m in fees paid to Qatari investors during the cash call.

Credit Suisse also gave a loan to Qatar as part of its SFr10bn capital raising in October 2008 but this was approved by regulators.

All three loans demonstrate how banks were scrambling to shore up their balance sheets after the collapse of Lehman Brothers in mid-September 2008. The resulting financial crisis hit Iceland harder than almost any other country.

But the country has become well-known for its tough approach, forcing bank creditors and not taxpayers to take the strain of the collapse of Kaupthing, Glitnir and Landsbanki as well as launching prosecutions of bankers and some of the country’s best known businessmen.

Iceland is still dealing with the fallout from the crisis with its new centre-right government recently unveiling measures to increase the debt relief – already the biggest in the world as a percentage of gross domestic product – for households.

Creditors of the failed Icelandic banks are still waiting to receive their money from the lenders’ estates amid a dispute with the country’s authorities over how much they will have to forfeit.

Two other people with Kaupthing connections were also convicted by the Reykjavik court: Magnus Gudmundsson, the former head of the bank in Luxembourg, got three years in prison while Olafur Olafsson, one of the lender’s main shareholders, received a three and-a-half year sentence.

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