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Credit Suisse Group AG

Case Details

Class Period: March 20, 2015 - February 3, 2016
Date Filed: Dec 22, 2017
Case Number: 1:17-cv-10014
Jurisdiction: Southern District of New York

Case Summary

The Complaint brings forth claims for violations of the Securities Act of 1934 against Credit Suisse Group AG (“Credit Suisse,” the “Bank” or the “Company”), and certain of its senior executives.  The Complaint alleges that Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, prospects, and risk controls on behalf of all persons or entities that purchased or otherwise acquired  Credit Suisse ADRs during the Class Period.

Credit Suisse is a Swiss multinational financial services holding company with its headquarters in Zurich, Switzerland and its United States operations in New York.  In the wake of the Great Recession of 2008, Credit Suisse was one of the last major European banks to maintain a full-scale investment banking division as a key part of its business strategy, and beginning in 2009, the Bank’s CEO led an effort to expand its investments in volatile fixed-income markets.

Specifically, the Complaint alleges that Defendants: (1) made false and/or misleading statements and/or failed to disclose that Credit Suisse’s risk protocols and control systems were routinely disregarded, even though the Company claimed that breaches of the Bank’s risk limits would trigger ‘immediate” escalation to the Bank’s CEO, and its Board of Directors, and were monitored by the Capital, Allocation and Risk Management Committee; (2) falsely and repeatedly touted that the Bank’s rigorous system of “comprehensive” and “sophisticated” risk and trading limits were “fundamental” to its investment business, leaving investors with the false impression that Credit Suisse had robust controls in place to prevent the over-accumulation of high-risk, illiquid investment instruments on its balance sheet; and (3) failed to inform investors that the Bank was accumulating billions of dollars of risky, highly illiquid securities in violation of its risk protocols by repeatedly raising its “binding” trading and risk limits.  By June 2015, the Bank’s CEO was suddenly replaced by a new CEO who promptly directed a month-long “in-depth’ assessment of the Bank’s business.   On October 21, 2015, the new CEO then announced a new strategy focused on “right-sizing” or shrinking the Company’s investment bank division, while still claiming to investors that the Bank’s exposure to its fix income franchise was minimal.  Credit Suisse then tapped investors for approximately $14 billion in capital, conducting a $6 billion rights offering on November 19, 2015, and an $8 billion exchange offering on December 15, 2015.  On February 4, 2016, Defendants stunned the market by disclosing that the Bank had incurred a staggering $633 million loss as a result of highly illiquid CLOs and distressed debt investments investments—a loss that would soon swell to a massive $1 billion write-down against the Bank’s earnings of 2015 and the first quarter of 2016, completely wiping out its profits and causing it to record its first full-year loss since the height of the 2008 financial crisis.  On the news of these enormous write-downs, the value of the Bank’s ADRs plummeted 11%, falling from $16.69 on February 3, 2016 to $14.89 on February 4, 2016, and wiping out approximately $230 million in market capitalization.  At first Defendants tried to claim they were blindsided as a result of unauthorized trades by bankers attempting to “generate revenues at all costs.”   However, financial media, analysts and the Company’s own employees rejected this notion as both shocking and inconceivable.  Defendants were then forced to acknowledge the truth to multiple media outlets that the “completely unacceptable” losses were driven by senior management.

On March 19, 2018, the City of Birmingham Retirement and Relief System, International Brotherhood of Teamsters Local No. 710 Pension Plan, Westchester Putnam Counties Heavy and Highway Laborers Local 60 Benefit Funds, Teamsters Local 456 Pension and Annuity Funds, and the International Brotherhood of Teamsters Local No. 710 Pension Plan were appointed as Co-Lead Plaintiffs. Saxena White was appointed Co-Lead Counsel.

On April 18, 2018, Lead Plaintiffs filed their Amended Complaint. Thereafter, on July 2, 2018, Defendants moved to dismiss the Amended Complaint. On February 19, 2019, the Court denied Defendants’ Motion to Dismiss with respect to Plaintiffs’ primary allegation—that Defendants issued false and misleading statements regarding Credit Suisse’s risk limits.

On March 6, 2019, Defendants filed a Motion for Reconsideration of the Court’s February 19, 2019 Order denying their Motion to Dismiss.  On April 5, 2019, while Defendants’ Motion for Reconsideration was pending, Defendants filed the Answer to the Amended Class Action Complaint.  On May 16, 2019, the Court denied Defendants’ Motion for Reconsideration, finding that Defendants failed to identify “an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice.”   The case is now in discovery.