Magnus Gudmundsson the former chief executive of the Luxembourg branch of Kaupthing bank, has been sentenced to serve three and a half years in prison following a court case in Iceland.

Prosecutors had accused the men of allowing, and then covering up the evidence, a Qatari investor to use money loaned from Kaupthing to buy a 5.1% stake in 2008.

The cash injection had been a last-ditch confidence-boosting move in an attempt to rescue the bank amid the fall-out of the Lehman Brothers collapse in September 2008. But Kaupthing, along with other Icelandic banks Glitnir and Landsbanki, failed after accumulating some $60 billion of debt.

A report in the Financial Times last year said that loan documents from the bank obtained by WikiLeaks  in 2009 revealed how it lent to some of its biggest shareholders to re-invest in the bank’s own shares.

The Qatari investor, Mohammed bin Khalifa al-Thani, was threatened with legal action for not re-paying the loan. But his lawyers reached an agreement with Kaupthing’s administrators--details of which have not been released--and claimed their client had been deceived by the former Kaupthing directors.

Alongside Gudmundsson, Hreidar Mar Sigurdsson, the former chief executive, was sentenced to five and a half years in prison, and Sigurdur Einarsson, former chairman of the board, to five years. Olafur Olafsson, one of the majority owners was handed a three-year sentence, despite al-Thani claiming that he did not know of any direct involvement by Olafsson to the deal.