Deutsche Bank Papered Over $12 Billion Loss, Report Says

NEW YORK ( TheStreet) -- Deutsche Bank ( DB) used fuzzy math during the financial crisis to avoid more than $12 billion in derivatives losses, according to allegations made by former bank staff in a report by the Financial Times Wednesday.

Three former Deutsche Bank employees have filed complaints with the U.S. Securities and Exchange Commission alleging the bank mismarked large "leveraged super senior" derivatives trades with a notional value of $130 billion in 2009, the FT says, citing copies of the complaint.

By not "marking" the trades to the existing market price, the German bank allegedly avoided a $12 billion balance-sheet hole and government scrutiny.

"The allegations of financial misstatements, which are more than 2 1/2 years old and were publicly reported in June 2011, have been the subject of a careful and thorough investigation, and they are wholly unfounded," Deutsche Bank said in a statement. "Moreover, the investigation revealed that these allegations stem from people without personal knowledge of, or responsibility for, key facts and information. We have and will continue to cooperate fully with the SEC's investigation of this matter."

The charges bring into question several of the largest personalities on Wall Street.

Sitting on the other side of a large portion of the Deutsche Bank derivatives trades was Warren Buffett's Berkshire Hathaway ( BRK.B), according to the FT. If the trades weren't priced correctly by the German bank, Buffett may have been cheated out of a big windfall or avoided a huge loss -- depending on the structures.

In addition, Robert Khuzami, the current head of enforcement at the SEC, was Deutsche Bank's general counsel for the Americas during the period in question. Khuzami has recused himself from all regulatory matters involving Deutsche Bank, according to the FT.

News of the troubled trades was first reported by Reuters, which said in a July article that Deutsche Bank fired London derivatives traders after finding "substantial trading anomalies" in its credit default swaps portfolio.

More from Stocks

The Stock Market Has Every Reason to See a Fresh Rally

The Stock Market Has Every Reason to See a Fresh Rally

3 Simple Tips on Investing From TheStreet's Jim Cramer

3 Simple Tips on Investing From TheStreet's Jim Cramer

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Video: There Are Some Big Changes Coming to the PGA Championships in 2019

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Tesla's Supercharger Network Is Booming -- Here's Why That's a Concern

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly

Attention 60 Minutes: Google Isn't the Only Big-Tech Monopoly