A Rhode Island pension fund has sued former Credit Suisse Group AG chairman Urs Rohner and 19 other directors and officers, alleging their failure to manage risk doomed the bank’s prime brokerage business to failure. failure with the collapse of Archegos Capital.
The lawsuit, filed in New York Supreme Court on Tuesday, seeks to recover compensation for the 20 defendants on behalf of the company, which lost $5.5 billion in the Archegos collapse.
The City of Providence Employees’ Retirement System alleged officers and directors were negligent under Swiss law, and their failures left the brokerage vulnerable when Archegos imploded a year ago.
“The fundamental problem was that the CS board failed to provide the resources, people, technology, systems and controls necessary to understand the overall risk the bank was taking on, let alone manage that risk” , said the pension fund.
Credit Suisse declined to comment on the lawsuit on Friday.
Archegos, which had $36 billion in assets, imploded last year when it was caught short on highly leveraged trades.
The scandal sparked a sellout of stocks, including ViacomCBS and Discovery Inc, and caused Credit Suisse, Nomura Holdings and other lenders to lose billions on their deals with Archegos.
Archegos founder Bill Hwang and chief financial officer Patrick Halligan were released on bail on Wednesday after being charged with fraud and racketeering for lying to banks about family office holdings. Hwang was also charged with stock manipulation. Both pleaded not guilty to the charges.