Iceland's special prosecutor has taken Larus Welding, the former head of the failed Glitnir Bank, into custody, Reuters reports.

Glitnir Bank was the first of the top three Icelandic commercial banks to fail in 2008.

Former director of market trade Jóhannes Baldursson and former broker Ingi Rafn Júlíusson were also taken into custody and between ten and twenty other former employees of Glitnir Bank were also investigated.

They are expected to be held for a week, apparently to prevent tampering with evidence or witness coercion.



The Special Prosecutor’s Office released a statement that indicates their investigation will focus on four areas (via IceNews):

1. The purchase of Glitnir’s own trade of shares issued by the bank on the stock market. Also the bank’s purchase of and trade with shares issued by FL Group.

2. Loans granted to various companies because of purchase of shares issued by the bank at the end of 2007 and in 2008. The original principal of these loans is believed to amount to almost ISK 37 billion (USD 310 million, EUR 231 million) in total.

3. Trade with forward contracts on shares issued by the bank.

4. Glitnir’s underwriting of the ISK 15 million (USD 126 million, EUR 93 million) stock offering by FL Group at the end of 2007, beginning of 2008.

The collapse of Iceland's three biggest commercial banks left $86 billion in debt (Iceland’s 2010 GDP was only $13.3 billion).

