Deutsche Bank to settle lawsuit over ties with risky clients and Russian oligarchs

Deutsche Bank has agreed to pay $26.25m to settle a US shareholder lawsuit accusing the German bank of lax oversight while doing business with risky, rich clients such as Jeffrey Epstein and Russian oligarchs.        

The preliminary cash settlement filed on Friday in federal court in Manhattan requires approval by US district judge Jed Rakoff, who in June allowed the proposed class action to proceed.

Shareholders led by Yun Wang, who traded Deutsche Bank stock in 2018 and 2020, claimed that the bank was aware that its know-your-customer and controls against money laundering were ineffective, and that its share price fell as problems emerged.

Deutsche Bank denied wrongdoing in agreeing to settle. CEO Christian Sewing and his predecessor John Cryan are also defendants, and also denied wrongdoing.

A bank spokesperson declined to comment. Sewing, who took over in 2018, tried to show investors that Deutsche Bank has addressed its internal controls shortfalls.

The lawsuit faulted Deutsche Bank’s work with Epstein, the late financier and sex offender, and with Danske Bank’s Estonia branch, which become embroiled in a money laundering scandal.

New York’s department of financial services fined Deutsche Bank $150m in July 2020 over its relationships with Epstein and Danske Estonia.

Shareholders also objected to Deutsche Bank’s taking on oligarchs such as billionaire Roman Abramovich as clients, in what they called the bank’s “relentless pursuit of profits”.

Friday’s settlement covers Deutsche Bank investors in the US from March 14 2017 to September 18 2020.

Lawyers for the plaintiffs said the $26.25m payout is 49.4% of the “likely recoverable” damages available, compared with a median 1.8% in settled securities class actions in 2021.

The lawyers may seek up to one-third of the settlement fund for legal fees.

Reuters