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The Swiss bank is facing a lawsuit in New York over allegations that it knowingly “concealed” its non-compliance with international sanctions.
In a class action complaint filed on April 29, Credit Suisse is accused of withholding information that would have demonstrated the bank’s non-compliance with sanctions against Russian oligarchs.
Among other allegations, Credit Suisse is accused of instructing investors to “destroy documents” that contained incriminating evidence of the bank’s non-compliance.
The complaint was filed at a New York district court by Carlos de March Bosch, an individual who purchased shares in Credit Suisse in June 2021.
He claims that as result of reputational damage caused by an investigation into the bank's alleged non-compliance of sanctions, its share price was hit, leading to substantial losses to him.
In court filings seen by VIXIO, de March Bosch declared a single purchase of 20,000 shares in the Swiss bank worth $215,760 at the time of purchase, which are now worth $132,000.
He is also hoping that other affected Credit Suisse shareholders, who are likely to number in the hundreds of thousands, will join him in the suit.
Where did it start?
The "Class Period" of the lawsuit begins on March 19, 2021 and ends on March 25, 2022, and the aim of the suit is to recover damages caused by Credit Suisse’s alleged violations of US securities laws.
The key legislation in play is Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, which the plaintiff will apply to Credit Suisse, its CEO Thomas Gottstein, and its chief financial officer, David Mathers.
The complaint originates from an article published by the Financial Times (FT) on February 7, which alleges that “Credit Suisse has securitised a portfolio of loans linked to its wealthiest customers’ yachts and private jets, in an unusual use of derivatives to offload risks associated with lending to ultra-rich oligarchs and entrepreneurs”.
The FT also claimed to have seen an investor presentation for a synthetic securitisation deal, in which Credit Suisse sold off $80m worth of risk related to a $2bn portfolio of loans backed by assets owned by ultra-high net worth clients.
Among other revelations, the presentation showed that, in 2017 and 2018, Credit Suisse recorded 12 defaults on yacht and aircraft loans, a third of which it said were related to US sanctions against Russian oligarchs.
At the time, press reports indicated that the sanctioned Russians in question were billionaires Oleg Deripaska, Boris Rotenberg and Arkady Rotenberg, who each had to terminate private jet leases with Credit Suisse.
The complaint alleges that Credit Suisse entered the securitisation deal described above in November 2021, and not only did this decision violate existing sanctions, but it also turned a blind eye to US intelligence reports from one month earlier warning of the aggressive build-up of Russian troops and weapons on the Ukrainian border.
On February 24, Russian forces invaded Ukraine, leading to further sanctions being placed on the Russian state and Russian individuals by the US, UK, Canada and the European Union.
Destroy the evidence
A week after the invasion, on March 2, the FT published another report focused on Credit Suisse’s securitisation deal.
Citing “three people whose firm received the request”, the FT said that Credit Suisse had sent letters to hedge funds and other investors asking them to destroy documents related to its richest clients’ yachts and private jets.
The letters told the investors to “permanently erase” all confidential information previously provided about the securitisation deal, citing a “recent data leak to the media” that it said had been “verified by our investigators”.
Credit Suisse responded to FT’s allegations one day later, on March 3, claiming that its letter to investors contained no evidence of wrongdoing.
"Credit Suisse’s entitlement to request non-participating investors to destroy documents relating to this transaction was, as is market practice, stipulated under the non-disclosure agreement,” the bank said.
“Documents shared with investors did not contain any client names and/or asset identifiers by the blind pool nature of the transaction.
“They contained portfolio statistics and performance modelling related to the underlying balance sheet positions.
“No data, client-related or otherwise, has been erased within Credit Suisse and, for clarity, this is in no way linked to the recent implementation of additional sanctions — with which we are fully compliant."
Nonetheless, based on the evidence cited by the FT, the complaint alleges: “Throughout the Class Period, Defendants made materially false and misleading statements regarding the company’s business, operations, and compliance policies.”
Specifically, the complaint alleges that Credit Suisse failed to disclose that the securitisation deal concerned loans that it had made to Russian oligarchs previously sanctioned by the US.
It also alleges that the purpose of the securitisation deal was to “offload the risks associated with these loans” and “mitigate the impact on Credit Suisse of sanctions likely to be implemented by Western nations in response to Russia’s invasion of Ukraine.”
News of the allegations spreads
On March 28, the US House Oversight Committee sent a letter to Credit Suisse asking it to turn over information and documents about its portfolio of loans backed by clients’ yachts and private jets, potentially including those of sanctioned Russian oligarchs.
In the letter, House Oversight chair Carolyn Maloney and Representative Stephen Lynch, chair of the Subcommittee on National Security, drew attention to the claims that Credit Suisse had instructed investors to “destroy documents” related to yachts and private jets owned by its clients.
“Given the timing of this request and its subject matter,” the letter notes, “Credit Suisse’s action raises significant concerns that it may be concealing information about whether participants in the securitisation deal may be evading sanctions imposed by the West after Russia’s invasion of Ukraine.”
After the publication of the House Democrats’ letter on March 28, Credit Suisse’s stock price fell 2.58 percent to close at $7.94 per share.
Year-to-date, Credit Suisse stock has dropped about 33 percent, from $10 on January 1 to $6.64 on May 3.
As a result of Credit Suisse’s wrongful acts and omissions, the plaintiff alleges that he and other class members have suffered “significant losses and damages”.
A jury trial has been demanded, and on May 2 a summons was sent to all defendants.
