Credit Suisse settled a legal dispute with an American pension fund over risky investments resulting in billions of dollars of losses resulting from the collapse of Archegos and Greensill Capital.

Credit Suisse reached a $32.5 million settlement of a lawsuit accusing the Swiss bank of misleading shareholders about the quality of its risk management, including its exposure to high-risk clients such as Archegos Capital Management.

As reported by «Reuters» (behind paywall), a tentative settlement of the proposed class action has been filed in US District Court in Manhattan and is now subject to approval by a judge.

Risky Business

Credit Suisse was accused of playing  «a kind of high-finance game of Russian roulette» by letting hedge funds and other blue-chip clients make risky multi-billion dollar bets with their loans. At the same time, the institution had publicly committed to managing its risk limits, risk monitoring, and credit exposure, according to Reuters.

Credit Suisse's «laissez-faire» approach led to at least $5.5 billion in losses, including the collapse of Archegos and British financial firm Greensill Capital. According to court documents, shareholders lost money as the price of Credit Suisse's US depositary shares fell.

Pleased with Settlement

In a statement, it said it was pleased with the settlement of the lawsuit in which it denied any wrongdoing. Credit Suisse is using 2022 as a transition year, one in which it has reduced its risk appetite. Following disastrous second-quarter results, CEO Thomas Gottstein was replaced by Ulrich Koerner who has a reputation as a cost-cutter. As part of his new role, Koerner has been tasked with undertaking a strategic review of the bank which the results will be made public when Credit Suisse announces its third-quarter results on October 27.

Lawyers get Their Cut

The collapse of Archegos caused about $10 billion in losses for the banks and wiped out more than $100 billion in value for shareholders.

Friday's settlement covers ADR investors from October 29, 2020, through March 31, 2021, in the case where the Sheet Metal Workers Pension Plan of Northern California was the lead plaintiff. Its attorneys plan to seek up to 27.5 percent of the settlement amount, or about $8.9 million, for legal fees.