J. Safra Sarasin and the Long Battle Against a Family From Kuwait

The dispute between J. Safra Sarasin and a rich Kuwaiti family never seems to come to an end. The two parties quarrel about a failed investment and a lot of money.

J. Safra in August 2014 took a bitter blow, losing a judicial battle in the Gulf, where the bank is fighting for business with the extremely rich.

A court in the financial centre of Dubai ruled in favor of the Khorafi family and against J. Safra Sarasin, upholding a claim by Rafed Al Khorafi, his mother and wife for $26.5 million in damages due to false advise.

Not Over Yet

The same court now decided that J. Safra Sarasin and its local unit, Sarasin-Alpen (ME), had to pay close to $60 million to the Kuwaiti family. This follows an award of $10 million in October 2014.

And that still won't settle the case. The Khorafis want a further $40 million, Abu Dhabi newspaper «The National» reported, because of a property development they had to abandon because of the losses incurred with the investments.

J. Safra Sarasin declined to comment when contacted by finews.ch.

Stigma That Sticks

The dispute may take years to settle. The stigma of false advice will stick to the Swiss private-banking community in the Gulf.

And it all started so well. The Khorafis got in touch with Bank Sarasin-Alpen in 2006, using the help of a middleman. The bank was happy to work with the Kuwaiti, offering them an investment with a substantial yield, which the bank said was low-risk.

Convincing Advice

The bank's advice was convincing. The family invested $200 million, with the help of a loan by Sarasin. The financial crisis came, the investment nosedived. The bank liquidated the investment, taking a loss, after the Khorafis didn't want to inject further securities. The family claimed they had taken a loss of $75 million.

The judicial quarrel is attracting a wide audience ever since. Sarasin says the family had overextended, the investment collapsing in the financial crisis. They had to blame themselves.

In Favor of the Client

The court ruled in favor of the client and against the bank, arguing that this was a clear case of false advice and the sale of unsuitable products to a naive investor.

The private banking industry now worries that claims against foreign wealth managers in the region could increase. The Kuwaiti family presumably wasn't the only one to lose money with financial products such as the one sold by J. Safra Sarasin.

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