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Credit Suisse faces huge losses in Greensill legal battle

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Lucy Burton
·2-min read
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Greensill
Greensill

Credit Suisse faces an American-style class action lawsuit over losses­ ­suffered by investors in its funds that backed the collapsed lender Greensill.

US law firm Boies Schiller Flexner is this week holding its first group meeting with investors who have been burnt by the Greensill Capital saga to discuss how to pursue litigation, insiders said. Litigation funders eager to take a slice of any payouts have also approached lawyers about backing the case, which is likely to centre around mis-marketing claims and even mismanagement.

The Zurich-based bank, which Lloyds chief executive Antonio Horta-Osorio is becoming chairman of next month, tried to soothe investor concerns last week. It told them it was working closely with Greensill’s administrator Grant Thornton and plans to make claims under relevant insurance policies. The lender said it still has around $2.3bn (£1.7bn) at risk in its funds linked to Greensill, adding that it “will consider appropriate legal actions to protect fund holders’ interests”.

JP Morgan analyst Kian Abouhossein said that as well as long-term questions around risk management “we see other ongoing issues” for the bank including “litigation concerns from Greensill”, which could result in billions of dollars worth of litigation charges.

Timeline: Greensill collapse
Timeline: Greensill collapse

Credit Suisse has had a nightmarish start to the year as a result of its ties to Greensill, the collapsed finance firm that was advised by David Cameron, as well as US hedge fund Archegos.

Even before the implosion of the two companies it was fighting to restore its reputation following a major spying scandal in 2019, while Boies Schiller is already advising investors in a UK case against Credit Suisse over its alleged role in Mozambique’s so-called “tuna-bond” loans scandal.

The Greensill scandal erupted after Credit Suisse froze $10bn worth of funds invested in Greensill debt, warning that there was considerable uncertainty about what some of these holdings were worth despite previously marketing the loans to clients as safe.

It went on to rejig its asset management division and suspend some bonuses.

Weeks later, its shares were hammered by a $20bn fire sale sparked by hedge fund tycoon Bill Hwang’s family office, Archegos.

Credit Suisse expects to this week post a pre-tax loss of 900m francs (£707m) for the first quarter, largely driven by a 4.4bn franc hit from its exposure to Archegos.

Credit Suisse and Boies Schiller both declined to comment.