St. Clair Shores (Mich.) Police and Fire Retirement System filed a lawsuit against Credit Suisse Group, accusing the firm of misleading investors and allowing high-risk clients — including Greensill Capital and Archegos Capital Management — to take on excessive leverage.
In a securities class action filed April 16 in U.S. District Court for the Southern District of New York, the pension fund said Credit Suisse along with CEO Thomas Gottstein, former Chief Risk and Compliance Officer Lara Warner and Chief Financial Officer David Mathers "issued materially false and misleading statements regarding the company's business metrics and financial prospects."
The suit alleges that the defendants "concealed material defects in the company's risk policies and procedure and compliance oversight functions and efforts to allow high-risk clients to take on excessive leverage," including Greensill and Archegos.
Credit Suisse's money management unit was forced to terminate $10.1 billion in supply chain finance funds due to valuation uncertainties and issues with insurance coverage related to Greensill-sourced and originated assets; while Credit Suisse' relationship with hedge fund firm Archegos, which defaulted on margin calls in March and saw the bank take an estimated $4.7 billion hit.
The bank was exposed to billions of dollars in losses, with defendants not only concealing "these operational landmines from Credit Suisse investors, which caused the price of Credit Suisse securities to be artificially inflated, but they also undertook actions indicating that Credit Suisse securities were substantially undervalued, such as a massive stock buy-back program worth 1.5 billion Swiss francs" — about $1.6 billion.
The securities class action was filed on behalf of all that purchased or acquired Credit Suisse American Depositary Receipts between Oct. 29 and March 31. The lawsuit said that, as a result of "defendants' false statements, Credit Suisse ADRs traded at artificially inflated prices, reaching a high of $14.95 per ADR by February 2021." The price then dropped to a low of $10.60 per ADR by March 31.
A spokeswoman for Credit Suisse declined to comment. Spokesmen for the pension fund could not immediately be reached for comment. The size of the pension fund was not available.