Credit Suisse Hit with Investor Class Action Over Collapse

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Credit Suisse Group AG and its top executives face a proposed investor class action following the Swiss bank’s collapse earlier this month, days after Silicon Valley Bank and Signature Bank failed and were taken over by U.S. regulators.

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The 22-page case says Credit Suisse, which rival USB Group AG agreed to acquire in a $3.2 billion government-backed deal, damaged investors financially by failing to disclose that the institution was experiencing significant outflows throughout the fourth quarter of 2022 and that there were “material weaknesses” in its financial reporting. The lawsuit out of New Jersey names as defendants several current and former Credit Suisse executive officers, including Chairman of the Board of Directors Axel P. Lehmann, CEO Ulrich Korner, former CEO Thomas Gottstein, CFO Dixit Joshi and former CFO David R. Mathers.

The suit alleges that in early December 2022, Lehmann misled the public by telling several news outlets that the bank had regained financial stability after clients had pulled out $89.7 billion in assets in October of that year. In a Financial Times article titled “Credit Suisse chair says outflows have reversed since ‘social media storm,’” Lehmann stated that “withdrawals had flattened across the group and had started to reverse in the Swiss domestic business,” the filing relays. The following day, Lehmann was cited in a Bloomberg article, saying that outflows had “basically stopped,” and “the main indicators of the bank’s financial stability were strong,” the complaint says.

According to the case, the defendants also overstated the effectiveness of Credit Suisse’s internal control over financial reporting in its 2021 financial report, filed on March 10, 2022. 

However, in a financial report filed on February 9, 2023, the defendants admitted that net asset outflows in the fourth quarter of 2022 had not reversed, causing the price of its American Depository Shares (ADS) to plummet 15.6 percent that same day, the suit explains.

Per the case, Credit Suisse’s ADS price dropped another 4.48 percent after the company announced on March 9 that it was delaying the publication of its 2022 annual report after it received a call from the U.S. Securities and Exchange Commission “regarding the Company’s cash flow statements in the years ended December 31, 2020, and 2019, as well as related controls.”

The complaint explains that the bank, on March 14, revealed in its 2022 annual report that its internal control over financial reporting and disclosure controls and procedures “were not effective” as of December 31, 2022. The case states that this news caused its stock price to fall 1.18 percent.

Credit Suisse’s fate was sealed on March 15 after its largest investor, Saudi National Bank, refused to buy any more of its shares, and its stock price fell another 13.94 percent, the suit says.

“Had Plaintiff and the other members of the Class been aware that the market price of the Company’s ADSs had been artificially and falsely inflated by Defendants’ misleading statements and by the material adverse information which Defendants did not disclose, they would not have purchased the Company’s ADSs at the artificially inflated prices that they did, or at all,” the case reads.

The lawsuit looks to represent any person or entity who purchased or otherwise acquired Credit Suisse American Depository Shares between March 10, 2022 and March 15, 2023.

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