Law firms prepare claims for Credit Suisse’s Greensill investors
Holders of supply chain finance funds face potential losses after group’s collapse
Investors in Credit Suisse’s Greensill-backed supply-chain funds have enlisted law firms in Zurich and London to initiate claims against the Swiss lender to recover potential losses.
More than 1,000 professional investors across Europe and Asia have money trapped in the $10bn supply-chain finance funds, which Credit Suisse suspended on March 1 following a lapsed insurance policy.
The funds were promoted as low-risk products that offered a higher return than cash deposits. But the implosion this month of Greensill Capital, the SoftBank-funded specialist finance firm that provided securities for the funds, has raised questions about how much money will be returned to investors.
Credit Suisse conceded last week that some of its funds’ investors had threatened litigation, adding that the fallout from the crisis could lead to “material” financial losses, client desertions and tumbling assets under management.
Just over $3bn has already been returned to investors, but Credit Suisse has said there is “considerable uncertainty” over much of the remaining assets in the funds.
“Given the amounts at stake, claims from investors could be significant,” said Matthias Gstoehl, a banking litigation partner at Zurich firm Lalive. He added that investors had already instructed his firm to “assess their options and work on recovery strategies”.
Class action lawsuits are rare in Switzerland, but Gstoehl said there were mechanisms to allow investors to consolidate their claims. “In a dispute of this magnitude it is key to scope out every possible remedy,” he added.
The funds were sold mainly to institutional investors such as pension funds, insurers and corporate treasuries, many of which were Credit Suisse clients. Ultra-wealthy individuals were also invested in the funds, with many from Asia and the Middle East, areas where Credit Suisse had been trying to grow its private banking business.
Natasha Harrison, managing partner of Boies Schiller Flexner, said the US law firm with a London office had seen “significant interest” from its clients in pursuing claims against Greensill Capital, its management and directors, and Credit Suisse.
“Litigation against some or all of these parties seems inevitable, given the fact pattern that is emerging,” she said.
It is unclear whether that would include David Cameron, the former UK prime minister who acted as an adviser to Greensill. The Financial Times reported last week that Cameron had lobbied on behalf of the firm.
One person with knowledge of the potential litigation against Credit Suisse and Greensill said several hedge funds had already expressed interest in “claims trading”, where they would buy ownership of any bankruptcy claim from creditors and seek to profit from any payout.
Lawsuits will probably centre around potential misrepresentation and non-disclosure to investors, as well as the relationship between Greensill, Credit Suisse and the insurers that underwrote some of the securities in the funds.
Credit Suisse and Greensill, through the finance firm’s administrators Grant Thornton, declined to comment.
Last week, Credit Suisse said in a statement to the FT: “Wherever there is evidence of fraud or malpractice that impacts investors in the supply chain finance funds, CSAM [Credit Suisse Asset Management] will consider appropriate legal action.”
Greensill has already been the subject of litigation in the US. Last week, the governor of West Virginia filed a lawsuit against Greensill Capital and its founder Lex Greensill, alleging that the now collapsed financing firm “perpetrated a continuous and profitable fraud” against his mining company.
Jim Justice launched legal action against Greensill in Manhattan federal court, alleging his coal mining empire is under threat due to its “sudden and unjustified abandonment” by the financing firm.
Justice’s Bluestone Resources and its related companies have been one of Greensill’s biggest clients in recent years.
Boies Schiller Flexner is acting on behalf of investors in an English High Court case against Credit Suisse in relation to the so-called tuna bond scandal in Mozambique.