- The case involves $100 million in mortgage-backed securities.
- Loreley Financing, representing IKB, had accused Credit Suisse of false representations.
Credit Suisse has emerged victorious in a long-standing case involving mortgage-backed securities valued at $100 million. Loreley Financing, a special purpose vehicle representing German bank IKB, had sued the lender in London’s High Court, claiming that the bank’s actions were deceitful.
According to a report by Reuters, the notes in question were linked to residential mortgage-backed securities and were purchased as part of a collateralized debt obligation deal just before the 2008 financial crisis.
At the heart of the dispute was Loreley’s contention that it had been misled by Credit Suisse, which had allegedly made “false and dishonest representations” about the value of these notes. The special purpose vehicle went further, accusing Credit Suisse of being involved in a “systemic fraud” regarding the securitization of residential mortgage-backed securities.
Loreley’s lawyer, Tim Lord, reportedly brought up Credit Suisse’s $5.28 billion settlement with the US Department of Justice, which was reached in 2016 to resolve claims that the bank had deceived investors in residential mortgage-backed securities. However, Credit Suisse countered this argument by emphasizing that the settlement with the DOJ did not explicitly mention dishonesty or fraud.
Judge Cites Lack of Evidence
However, Judge Sara Cockerill ruled in favor of Credit Suisse. She stated that there was insufficient evidence to support Loreley’s claim of systemic fraud and that the alleged fraud was limited to “isolated documents.” This verdict marks a significant legal win for Credit Suisse and puts an end to one of its lingering legal disputes.
UBS, the current owner of Credit Suisse, inherited several legal battles following its state-assisted rescue of the bank earlier in the year. Some of these disputes have been resolved, but the Loreley Financing case was one of the major challenges that UBS had to face.
Meanwhile, Santander, the Spanish lender, agreed to bring on board David Miller, the former co-head of Credit Suisse’s investment bank, the Financial Times reported. This addition marks Santander’s latest move in recruiting talent from the collapsed Swiss lender.
David Miller will assume the role of vice-chair in Santander’s corporate and investment bank, based in New York. He is expected to report to José Linares, the head of this division, starting in January.
