Deutsche Bank Faces €500 Million Lawsuit in Forex Scandal


One of Spain’s biggest hotel groups is suing Deutsche Bank for €500m in damages over the alleged misselling of risky Forex derivatives that resulted in losses.

Spain’s seventh-largest hotel chain, Palladium Hotel Group, is suing Deutsche Bank for a massive €500 million lawsuit for alleged misselling of complex and risky forex derivatives, Financial Times is reporting.

The claim for the damages was filed in the High Court of London last month and is among many allegations the bank is facing for selling exotic financial products to small and mid-sized companies in Spain.

Details of Deutsche Bank €500 million lawsuit

According to the lawsuit, the hotel operator made 259 derivatives transactions facilitated by Deutsche by 2019. The outstanding notional amount of the contracts at the peak of the transaction in 2017 touched €5.6 billion.

Deutsche touted the forex derivatives contracts to be a safe hedge for forex fluctuations and changed in interest rates. However, the hotel chain ended up in mounting losses and fees and had to cover them with ‘substantial loans’.

The German bank even restructured the loss-making derivatives investments for the hotel, charging more fees. But, that only resulted in deeper losses.

The deals between the bank and the hotel were fixed by the broker of Palladium’s founder. Now, the hotel group is accusing the bank to have exploited personal relationships for financial gains.

The lawyers of Palladium said that the hotel group did not have enough expertise to know the risks of such complex financial derivatives.

According to the report, this could be a part of a scandal on the part of the German lender as it sold risk derivatives to 50 to 100 companies. Upon many allegations, the bank even entered into out-of-court settlements and even sacked two of its staff. It also initiated an internal probe into the allegations.

Read also: Deutsche Bank Will Pay Over $10 Million Penalty to Settle CFTC Charges

However, Deutsche said that the issue with Palladium is a standalone occurrence and is adamant on legitimacy on its part. The bank also added that it will defend itself ‘vigorously,’ throwing away the chances of any settlements.

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