UBS Faces US Investor Lawsuit Following Credit Suisse Collapse: What You Need to Know

In a recent ruling, UBS will face two lawsuits from investors claiming that Credit Suisse misled them before its collapse in March 2023. A U.S. judge has allowed these cases to proceed, highlighting concerns over false statements about the bank’s financial health.

U.S. District Judge Colleen McMahon stated that Core Capital Partners could represent bondholders affected by the collapse, particularly those holding Credit Suisse’s Additional Tier 1 (AT1) bonds. These bonds were unexpectedly written down to zero as part of UBS’s acquisition of Credit Suisse for $3 billion.

The judge also allowed a separate class-action lawsuit from other U.S. investors who purchased Credit Suisse American depositary shares and various bonds. This decision was made even after Core Capital alleged the lead plaintiff in the other case had neglected AT1 bondholders.

Interestingly, AT1 bonds are designed to help banks during tough economic times, ranking higher than regular shares. However, Switzerland’s financial regulator, FINMA, ordered a massive writedown of 16 billion Swiss francs (around $20 billion) of these bonds, shocking many investors. This move led to numerous lawsuits in the U.S. and Europe.

The defendants in these lawsuits, including former executives of Credit Suisse, argue that the FINMA decision, rather than any alleged fraud, caused the bondholders’ losses. However, Judge McMahon indicated that the claims of misleading statements could have played a role in the value decline of these bonds, which ultimately led to their total loss.

In a related ruling, a previous investor lawsuit blaming “continuous mismanagement” for Credit Suisse’s downfall was dismissed earlier this year.

This situation highlights the complexity of the financial world and the fallout from a bank’s collapse. With increasing awareness around the risks of investment in financial instruments, experts urge investors to dig deeper into a bank’s health before committing their money.

In the context of recent data, the global banking sector has seen increased scrutiny, especially following high-profile failures. According to a survey by the Financial Stability Board, 70% of investors are now more cautious about investing in financial instruments linked to banks, reflecting a growing demand for transparency and accountability.

This ongoing legal battle is a reminder of the need for due diligence in investing and the implications of corporate decisions on individual investors. The outcome may set significant precedents for how bank-related fraud cases are handled in the future.



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Credit Suisse, Colleen McMahon, Core Capital, American depositary shares