The four were convicted at a Reykjavik district court on Thursday of misleading investors by allowing a sheikh of Qatar's ruling Al-Thani family to buy a 5.1 percent in the bank with funds loaned from the bank itself.

Special prosecutor Olafur Hauksson said that the loans granted by the bank was a move to boost share price.

Hreioar Mar Sigurosson, Kaupthing’s former chief executive, was sentenced to five and a half years in prison, while former chairman Sigurdur Einarsson received a five-year sentence.

Magnus Guomundsson, former CEO of the bank’s branch in Luxembourg, was sentenced to three and a half years and Olafur Olafsson, Kaupthing’s second largest shareholder at the time, was given three years.

None of the accused were in court for the decision, but it is expected they will appeal.

The case is by far the largest brought against former employees of Iceland's failed banks by the special prosecutor since the financial crisis in 2008.

Relative to the size of its economy, Iceland's systematic banking collapse is the largest suffered by any country in economic history. Kaupthing and other Icelandic banks aggressively expanded overseas leading up to the global financial crisis and their collapse in 2008 led to an economic crisis which helped bring the country's economy to its knees.