Credit Suisse caught the headlines with a crashed volatility product during the turbulence on the markets in February. An investor has now filed a lawsuit against Switzerland’s second-largest bank.
The investor is suing Credit Suisse in connection with losses of a volatility product at a U.S. district court in Manhattan, according to a report by «Reuters». The claimant alleges that the bank made false statements about the complex financial product and manipulated it to minimize own losses.
Credit Suisse had launched the product called Daily Inverse VIX Short Term ETN in 2010. It speculated on low volatility on financial markets. It went well until February.
Sudden Increase in Volatility
The massive and extremely rapid losses on the markets prompted a sudden increase in volatility, wiping more than 90 percent off the product’s value within in a short time. Buyers of the product allegedly lost more than $500 million, while CS wasn’t affected.
But Switzerland’s second-largest bank of course was caught out: CEO Tidjane Thiam actually brought a leaflet of the product along to the annual media conference and read out from the small-print.
Correct Information
Faced with the lawsuit, Credit Suisse repeated that it had correctly and fully informed about the risks of the product, which in any case was directed at experienced, institutional clients only. The bank also said it hadn’t mislead investors about the value of the product and had not been the cause of the drop on February 5, 2018.
The size of the sum claimed by the investor hasn’t been made public yet, but he is said to favor a class action lawsuit.
