DUBAI // Three members of a prominent Kuwaiti family are suing Bank Sarasin, a Swiss financier, for US$225 million (Dh826.4m) in Dubai after bankers allegedly provided them with "negligent investment advice" that led to losses, court documents show. The case is part of a growing number of disputes in the region where wealthy families and investors are taking action against banks that handled their investments.
Credit Suisse filed a claim against the private bank Ansbacher & Co in London this week for allegedly misleading a client into investing in a Dubai property development that had "yielded no positive result". Ansbacher is part of Qatar National Bank. Rafed al Khorafi, the chairman of AM Al-Khorafi Establishment in Kuwait, along with his wife and mother, allege that Bank Sarasin made "false" representations that led them into high-risk investments, instead of the capital-protected instruments they had requested. The family members lost $75m and are seeking triple damages because of "negligence" under Dubai International Financial Centre (DIFC) law, the documents show.
Bank Sarasin-Alpen, the DIFC-based subsidiary of the Swiss bank, denied the claims and argued against the DIFC Courts as the appropriate jurisdiction in a filing to the court on Monday. Bank Sarasin & Co, the Swiss parent company, has not yet responded to the claims in DIFC Courts. The first hearing for the case will take place in April. The case is one of the largest legal claims to be filed in the DIFC Courts, which saw the number of cases rise to 36 last year from just nine in 2008.
The family members allege that in April 2007, Mr al Khorafi obtained loans from Al Ahli Bank Kuwait (ABK) to make investments outside of Kuwait. His mother and a co-claimant in the case, Amrah al Hamad, pledged shares in the National Bank of Kuwait as security for the investments. Mr al Khorafi alleges ABK officials recommended that he make investments through Bank Sarasin-Alpen. Over the following months, there were several meetings where Bank Sarasin-Alpen employees allegedly convinced the family to invest in what they believed to be capital-protected investments that yielded periodic returns.
One Bank Sarasin employee allegedly said the family would "never lose money", documents show. The family members allege their money was actually invested in a "highly leveraged portfolio of complex zero coupon-generating structured products" that was "only suitable for the most aggressive of investors". All of the investments were instruments from Bank Sarasin and related companies, including such products as the "Bank Sarasin Ltd SaraFloor Uts - Cum - Financial Services Basket" due in July of this year.
By the following summer, the investments started to suffer losses and the defendants entered a prolonged dispute with Bank Sarasin that resulted in the lawsuit, the documents show. It is also alleged that Bank Sarasin-Alpen employees violated DIFC and Dubai Financial Services Authority regulations in their dealings with the family members. Mr al Khorafi's family has wide interests in telecommunications, manufacturing and construction in the region.
AM Al-Khorafi Establishment, Mr al Khorafi's company, is involved in information technology, furniture manufacturing and security systems, according to its website. firstname.lastname@example.org