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Reckless Risk-Taking Allegations Leveled Against Three Former Credit Suisse CEOs in Court Filing

A group of Credit Suisse AT1 bondholders has taken legal action by filing a class action suit in a New York court, leveling accusations against former executives, including three former chief CEOs, for their alleged role in the downfall of the Swiss bank.

In the lawsuit filed on Tuesday, former leaders Thomas Gottstein, Tidjane Thiam, and Brady Dougan, alongside several other executives, are being accused of engaging in excessively risky trades with the aim of attaining substantial short-term gains and bonuses.

According to the lawsuit, Credit Suisse’s directors, senior executives, and the toxic culture they cultivated were instrumental in eroding trust within the bank, ultimately leading to its collapse.

Furthermore, the legal action claims that the executives fostered a culture within Credit Suisse that prioritized profits, reckless risk-taking, and self-serving actions over prudent risk management and adherence to legal requirements.

The collapse of Credit Suisse prompted Switzerland’s regulator to deem approximately $18 billion of the bank’s Additional Tier 1 (AT1) debt worthless as part of its acquisition by former competitor UBS in March. This unexpected development sent shockwaves through the market and set off a wave of litigation.

The agreement disrupted the longstanding practice of granting bondholders priority in debt recovery over shareholders, resulting in numerous lawsuits being initiated.

Recent reports indicate that Switzerland’s Federal Administrative Court has received a staggering 230 claims against the country’s financial regulator, FINMA, following its decision to write off the value of Credit Suisse’s AT1 bonds.

The situation surrounding Credit Suisse and the allegations against its former executives continue to unfold, as the legal proceedings shed light on the circumstances that led to the bank’s downfall and the subsequent fallout experienced by stakeholders.

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