J. Safra Sarasin has suffered yet another defeat in its conflict with a rich client in Kuwait. It is now faced with an ultimatum with potentially serious consequences.

The fight between the Khorafi family and J. Safra Sarasin is turning into a never-ending nightmare for the private bank. Lawyers acting on behalf of the institute today said that the bank lost an appeal at the Court of Dubai International Financial Centre (DIFC).

Bank Sarasin-Alpen (ME), the local private-banking unit, wanted to the court to cancel a payment of $35 million in damages to the Khorafi family. The DIFC in two rulings of October 2014 and November 2015 ordered J. Safra Sarasin to pay an aggregate $70 million to its former client.

Preemptive Closure?

The judges at the DIFC now told the local unit to pay up by February 1, otherwise it faces being liquidated. According to the information available to finews.ch, Sarasin-Alpen has now acted preemptively and stopped its business in Dubai. The Website of the company is defunct.

J. Safra Sarasin refused to comment, citing the ongoing legal process.

The private-banking industry is looking closely at the proceedings in Dubai. The lawyers representing the Khorafis have termed it the biggest case of ill advise in the region.

Investments Worth a Pittance

And it all started so well. The Khorafis got in touch with Bank Sarasin-Alpen in 2006, using the help of a middleman. The bank was happy to work with the Kuwaiti, offering them an investment with a substantial yield, which the bank said was low-risk.

The bank's advice was convincing. The family invested $200 million, with the help of a loan by Sarasin. The financial crisis came, the investment nosedived. The bank liquidated the investment, taking a loss, after the Khorafis didn't want to inject further securities. The family claimed they had taken a loss of $75 million.

Series of Setbacks

In the ensuing judicial quarrel, J. Safra Sarasin suffered a series of setbacks. The DIFC is convinced that the bank sold unsuitable financial instruments to naive investors in a bid to generate handsome commissions.

The private banking industry now worries that claims against foreign wealth managers in the region could increase. The Kuwaiti family presumably wasn't the only one to lose money with financial products such as the one sold by J. Safra Sarasin.