Credit Suisse’s lawsuit against SoftBank in London’s High Court is being challenged following a bailout by rival UBS, which counts the Japanese conglomerate as a client, according to people familiar with the matter.
UBS’s top legal team has been evaluating the numerous lawsuits that have become embroiled in Credit Suisse since the acquisition was completed last week, weighing the benefits of pursuing them against the potential damage to its business interests and reputation.
The consideration comes as SoftBank begins its defense of a $440 million loss case brought by Credit Suisse linked to Greensill Capital, accusing the Swiss bank of trying to blame itself for its failures.
Credit Suisse, which was forced to close $10 billion in client funds following the collapse of specialist finance firm Greensill two years ago, filed a formal lawsuit against SoftBank in April as part of a long-running attempt to recover funds on behalf of its wealthiest clients.
About 1,000 Credit Suisse clients lost hundreds of millions of dollars after investing in a suite of Greensill-linked supply chain finance funds, which the Swiss bank marketed as low risk.
Credit Suisse alleges that SoftBank orchestrated a financial restructuring of Katerra — a California-based construction firm funded by SoftBank’s Vision Fund and a client of Greensill — that benefited the Japanese group at the expense of UBS’ clients.
“In order to deflect responsibility for its own failures – which have been extensively and forcefully documented by Swiss regulators – (Credit Suisse) now claims that defendant SoftBank engineered a transaction in late 2020 designed to harm (Credit Suisse), Lawyers for SoftBank wrote in a defense filing last week. “It’s absolutely wrong.”
The lawsuit focuses on the $440 million Katerra owes customers of the Swiss bank, which went bankrupt after Greensill collapsed.
Katerra received the money through Credit Suisse’s supply chain finance fund. In late 2020, SoftBank agreed to provide Greensill with an emergency cash injection aimed at repaying Katerra’s debt. The Financial Times previously reported that the money never reached the Credit Suisse fund.
“The fact that the Greensill Group subsequently used the funds for other purposes—undiscovered by the SoftBank Defendants until after the transaction was completed—does not make the SoftBank Defendants liable for losses (of the Credit Suisse fund),” SoftBank’s defense states.
Credit Suisse has 21 days to respond to SoftBank’s defense statement.
In February, Swiss financial watchdog Finma concluded a two-year investigation into Credit Suisse’s failures surrounding the Greensill collapse, finding “serious breaches of Swiss supervisory law”.
Of the $10 billion locked in when the supply chain fund closed, Credit Suisse recovered $7.4 billion, with the remainder more difficult to recover. It said it could take up to 10 years to resolve the issue through a barrage of lawsuits and insurance claims.
UBS’s state-orchestrated bailout has raised questions about whether its new owner will continue to pursue litigation given its relationship with SoftBank, according to two people familiar with the matter. SoftBank is a client of its investment bank.
UBS was one of several banks involved in selling 213 million Alibaba shares last year as SoftBank raised as much as $22 billion in cash by paring its stake in the Chinese e-commerce giant.
Credit Suisse and UBS declined to comment.
Several other legal cases following the collapse of Greensill Capital have also come to a head.
This month, the Financial Times reported that Greensill Capital founder Lex Greensill and four former Credit Suisse bankers had been named as suspects in a Swiss criminal case that is due to open next week.
In a separate case, U.S.-based private financial group White Oak has filed legal action against Marsh for $143 million over his Greensill work, citing the insurance broker’s failure to pass on information about the company’s coverage issues. Key Information.
Additional reporting by Kate Beioley in London