By Jonathan Stempel
NEW YORK (Reuters) -UBS must face two lawsuits by investors who said the former Credit Suisse defrauded them prior to its March 2023 demise with false and misleading statements about its financial condition, a U.S. judge ruled on Monday.
U.S. District Judge Colleen McMahon in Manhattan said Core Capital Partners may sue on behalf of U.S. purchasers of Credit Suisse Additional Tier 1 bonds, which a Swiss regulator ordered written down to zero as part of UBS’ rescue of that bank.
McMahon also said U.S. purchasers of Credit Suisse’s American depositary shares and several other bond issues may pursue their separate lawsuit, which she refused to dismiss last September, as a group in a class action.
She declined to combine the two lawsuits, after Core Capital accused the lead plaintiff in the other case, a New York University engineering professor, of having “abandoned” the AT1 bondholders.
UBS declined to comment.
Other defendants include Credit Suisse’s former chief executive Ulrich Koerner, former chairman Axel Lehmann and former chief financial officer Dixit Joshi. Their lawyers did not immediately respond to requests for comment.
AT1 bonds are a capital cushion that can support banks during market turmoil.
Though they rank above shares in banks’ capital structures, Switzerland’s financial regulator FINMA ordered Credit Suisse to write down 16 billion Swiss francs (now about $20 billion) of the bonds, while letting UBS buy that bank for $3 billion.
The writedown shocked investors and prompted many lawsuits in the United States and Europe.
In seeking a dismissal of Core Capital’s lawsuit, the defendants said the FINMA-ordered writedown, not any alleged fraudulent misstatements, caused the bondholder losses.
But the judge found it plausible that disclosures of the defendants’ alleged fraud caused the value of the AT1 bonds to decline, “ultimately culminating in the eventual write-down of all Credit Suisse AT1 bonds to a value of zero.”
In February 2024, McMahon dismissed a separate U.S. investor lawsuit blaming two decades of “continuous mismanagement” for Credit Suisse’s collapse.
(Reporting by Jonathan Stempel in New York; Editing by Stephen Coates)
