People didn't invest large amounts of money overseas. This was not a case of greedy people putting money into some dodgy offshore scheme. That's not what happened at all.
People saved money with Icelandic banks that had opened branches in the UK and the Netherlands. We're not talking about investors - we're talking about depositors, who were supposed to have been protected by a deposit guarantee scheme in the banks' home country.
That is not the story afaik (though I'd happily accept being shown otherwise). There was a great deal of investment 'overseas'. It truly sucks that depositors (who were storing their money in an overseas institution for a better rate) got burned. But I think it is naive to say that the majority of the money lost was simply people storing their paychecks in the bank. The entire finance game was rigged in the first place (as many events have shown) and it seems like everyone was going to get f'd by no fault of their own.
Iceland protecting their public (at the expense of their financial industry) and actually prosecuting (some) of those at fault seems a damn sight better than just having everyone pay out the nose (which happened anyway) and letting gamblers get off with no risk.
People saved money with Icelandic banks that had opened branches in the UK and the Netherlands. We're not talking about investors - we're talking about depositors, who were supposed to have been protected by a deposit guarantee scheme in the banks' home country.