Danske Bank A/S

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Case Summary

Company Name
Danske Bank A/S
Stock Symbol
Class Period
January 9, 2014 to October 23, 2018
Motion Deadline
March 10, 2019
Southern District of New York

The complaint charges Danske Bank and certain of its former officers and/or directors with violations of the Securities Exchange Act of 1934.  Danske Bank, based in Denmark, provides various personal banking, business banking, corporate and institutional banking, and wealth management products and services, along with mortgage finance, real-estate brokerage, foreign exchange and equity services, and trades in fixed income products, including with customers who reside or are domiciled outside Denmark.

The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Danske Bank’s business and operations.  Specifically the complaint alleges that defendants failed to disclose that: (i) Danske Bank’s Estonian branch was facilitating money laundering through at least March 2016; (ii) that a whistleblower had reported the Estonian money laundering to the Company in 2013; (iii) that Denmark’s Financial Supervisory Authority (the “DFSA”) had been investigating the Estonian money laundering since 2014; (iv) that Danske Bank had concealed the results of its own internal investigation from the DFSA, further exposing it to regulatory action and fines; (v) that Danske Bank had been overstating its historical profits by including the profits derived from its illicit Estonian operations; and (vi) that Danske Bank lacked effective internal and reporting controls.  As a result of this information being withheld from the market, Danske Bank American Depositary Receipts (“ADRs”) traded at artificially inflated prices of more than $20 per ADR during the Class Period.

As news of Danske Bank’s involvement in the Estonian money-laundering allegations began to leak out beginning in September 2017, the price of Danske Bank’s ADRs began to decline.  On September 5, 2017, Reuters reported that Danske Bank had hired the former head of Denmark’s intelligence agency to help it in its effort to counter money-laundering claims.  On September 21, 2017, Danske Bank issued a press release disclosing, among other things, that it had “expand[ed] its ongoing investigation into the situation at its Estonian branch.”  On December 21, 2017, Reuters reported that Danske Bank “had been fined 12.5 million Danish crowns ($2 million)” by the DFSA “for violating anti-money laundering rules in relation to the monitoring of transactions to and from correspondent banks,” and that Danske Bank was “examining whether its Lithuanian and Latvian branches had been involved in money laundering, expanding an investigation beyond its Estonian operations.”  On May 3, 2018, Reuters reported that the DFSA had issued a report stating it had identified “serious weaknesses” in Danske Bank’s governance and that Danske Bank “was exposed ‘to significantly higher compliance and reputational risks than previously assessed.’”  On September 14, 2018, The Wall Street Journal disclosed that U.S. law enforcement agencies had begun investigating the scandal following a tip to the SEC from a whistleblower at least two years earlier.  Finally, on October 23, 2018, The Wall Street Journal published an article disclosing the full extent of the information the whistleblower had alerted Danske Bank’s senior executives to back in 2013 and detailing how Danske Bank had endeavored to silence the whistleblower for years.  As the market learned the full extent of the Company’s prior reliance on illicit profits and its resulting exposure to regulatory action between September 2017 and October 23, 2018, the market price of Danske Bank ADRs fell to as low as $9.50 per ADR, erasing more than $2.54 billion in market capitalization.

Class Period: January 9, 2014 - October 23, 2018
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