Opinion ID: 2747343
Heading Depth: 2
Heading Rank: 2

Heading: Lead Plaintiff Ek Vathana’s WorldCurrency CDs

Text: and Iceland’s Financial Crisis On July 23, 2008, lead plaintiff Ek Vathana opened the first of two ISK-denominated WorldCurrency CDs that matured during the class period. The price of ISK when Vathana opened the CD was 78.65 ISK per U.S. dollar. Id. The value of the CD when Vathana opened it was 747,676.53 ISK, or $9,447.49. Vathana opened his second WorldCurrency CD on September 10, 2008. The exchange rate was 88.05 ISK per U.S. dollar, and the value of the CD was 3,547,501.93 ISK, or $40,040.07. Both of Vathana’s WorldCurrency CDs had three-month maturities. A month later, Iceland’s financial system was in crisis. The Prime Minister addressed the nation on October 6, 2008, describing the “major difficulties” facing Iceland’s banks, which had grown so rapidly before the recession that their liabilities were “many times Iceland’s GNP.” The Prime Minister warned the country that “[m]ajor credit lines to the banks have been closed and it was decided this morning to suspend trading with the banks and with the savings funds in the Icelandic Stock Exchange.” The Icelandic government passed emergency legislation allowing it effectively to put Iceland’s major banks into receivership. The Central Bank of Iceland imposed restrictions on the exchange of ISK into foreign currency. Because of the crisis in Iceland, EverBank was unable to find any counterparties willing to offer forward contracts for ISK. Because it could not hedge the risk of offering VATHANA V. EVERBANK 7 WorldCurrency CDs denominated in ISK going forward, EverBank decided not to roll over its ISK-denominated WorldCurrency CDs set to mature in early October 2008. Id. EverBank paid the proceeds of the matured CDs in U.S. dollars, calculating their value using the available wholesale spot price. Id. In mid-October, EverBank was again unable to find anybody willing to enter into forward contracts for ISK. However, unlike the week before, it could not even find any parties willing to trade ISK for U.S. dollars on the wholesale market. Vathana’s first WorldCurrency CD matured on October 22, 2008. Two days before it matured, Vathana emailed EverBank, instructing it to roll over his CD. He wrote, “I will not accept a forced liquidation conversion. If you choose to close my accounts, I demand you send me the actual physical ISKs.” Id. In late October 2008, EverBank finally located a party willing to offer a ISK/Euro forward contract, on the basis of which EverBank could calculate a wholesale conversion rate for U.S. dollars. The exchange rate was about 253 ISK per U.S. dollar, dramatically worse than the 78.65 ISK per U.S. dollar rate at which Vathana opened the CD. Id. EverBank notified Vathana that it had closed his CD, converted the ISK to U.S. dollars at the 253 ISK per U.S. dollar rate, and deposited the proceeds, $2,958.03, into Vathana’s account with EverBank. Vathana lost $6,489.46. On December 10, 2008, EverBank closed Vathana’s second WorldCurrency CD and returned the value of that account to Vathana in U.S. dollars at a slightly better 8 VATHANA V. EVERBANK exchange rate of about 217 ISK per U.S. dollar. The rate was still significantly worse than the approximately 88 ISK per U.S. dollar rate at which he opened the CD. Vathana lost $23,700.88 on that CD. EverBank did not renew or roll over any of its ISK- denominated WorldCurrency CDs maturing between October 8, 2008, and December 31, 2008. Instead, it closed the CDs on their maturity dates and returned the value of the CDs to its customers in U.S. dollars according to the rates that EverBank obtained in the wholesale market.