Credit Switzerland may have disappeared, but that has not been forgotten. The London High Court is the latest venue to unearth a failure at Venerable Swiss Bank before Arch Rival UBS took an emergency in 2023.
Rollsville, London, is facing a $440 million legal battle between Suftbank, a group founded by Australian financial operator Rex Greensill, and a subsidiary of Greensill Capital. The fund has filed a lawsuit seeking to recover hundreds of millions of dollars investors say they have lost following the collapse of Greensill in 2021.
With the Greensill explosion, Credit Suisse has suspended and shut down $10 billion worth of funds that it lent money through its supply chain finance business, locking in the savings of more than 1,000 of Swiss Bank’s most respected clients.
Justice Miles, the judge who presides over the four-week trial, ordered an outside law firm to release a prepared report for Swiss regulator FINMA on Wednesday. He also ordered the release of a copy of FINMA’s subsequent ruling regarding Credit Suisse’s relationship with Greensil after requests from the Financial Times and other media organizations. An excerpt from the 500-page file is presented as evidence of the trial.
Previously, confidential FINMA files reveal new information about the nature of Credit Suisse’s relationship with Greensill, as well as new information accompanying the cultural failures that UBS continues to integrate the two lenders.
This is the highlight.
Secrets and lies
According to Swiss financial regulators, Credit Suisse’s relationship with Rex Greensil has caused “big reputational damage” to now-defunct banks, whose executives “naturely” rely on information they receive from Australian financial operators.
Finma said the bank had not acted on the warnings it received about the Greensil capital, and sometimes it interfered with investigators during the investigation.
Lex Greensill arrives in Rawlsville earlier this week to provide evidence at a $440 million trial ©Chris J. Ratcliffe/Bloomberg
Watchdog said that inquiries to Credit Switzerland regarding allegations against metals giants Sanjeev Gupta and Greensil have been “incomplete, misleading or incorrectly answered” by the bank.
“Even if asked repeatedly by regulators, critical questions have repeatedly encountered resistance from the bank and its highest level of management. This behavior is difficult to understand,” Finma added.
The 2022 report also shows that, according to FINMA, they were able to “fulfil different benefits” with “different benefits” within Credit Suisse. A spokesman for Lex Greensill did not immediately respond to a request for comment.
Since the state-sponsored acquisition of Credit Suisse, UBS has been forced to deal with the legacy issues of its former rivals, and has so far agreed to pay hundreds of millions of dollars to resolve other lawsuits. According to UBS, the FINMA file deals with the issue of legacy credits Switzerland prior to the acquisition.
Anonymous Tips
The FINMA file reveals that Credit Suisse’s management has received some anonymous tips, warning them about Greensill Capital and in addition to confronting “negative” articles about the group from FT and others.
Greensill Capital claimed that it used technology to revolutionize a stable niche in supply chain finance and presented a role that helped address the issue of slow bill payments.
In its enforcement ruling in December 2022, FINMA said anonymous tips to bank top management could not encourage a detailed investigation.
“This is despite the fact that the specific content and language of anonymous references suggest that they should be taken seriously,” Finma said. “The banks simply relied on information from Greensill.”
In one case, he wrote to members of Credit Suisse’s executive committee in accordance with an anonymous email raising concerns about the bank’s relationship with Michel Degen, who headed the bank’s Swiss and EMEA’s asset management division.
In a statement, Degen said “Greensill Capital is a successful and highly specialized business partner with the bank, which has been scrutinized in detail,” according to Finma. “He took the text used here verbatim from Rex Greensil’s statement,” the regulator added.
A lawyer representing Degen told the FT on Thursday that a statement from Greensill was added at the end of the email.
“If Degen said he rephrased what Rex Greensil said, you misunderstood the report,” added Degen’s lawyer.
According to the file, Credit Suisse has fired 11 employees.
Greensill Capital collapsed in 2021, with Credit Suisse suspended $10 billion worth of funds and shutting down © Anthony Devlin/Bloomberg
“Legal or bad”
FINMA reports that in 2020, Greensill supporter Softbank shed more light on the fallout from an FT article that revealed its investment in the Credit Suisse fund.
The bank initially issued a statement claiming that recent media reports contained “inaccurate and misleading statements.” However, after an internal investigation, Credit Suisse found that executives had signed a so-called “side letter” with SoftBank, which violated the fund’s rules.
In an email regarding the findings of the investigation, Credit Suisse’s Audit Committee chair said:
Credit Suisse rebuked the two employees with a side letter and handed them a “final warning.” Details of this responsibilities contained in the FINMA file indicate that a “misleading” statement had been communicated to regulators about the funds.
Corporate spy sent
The report shows that Credit Suisse executives have sought to encourage Greensil to reduce funding for Gupta’s GFG Alliance.
According to Finma’s ruling, Credit Suisse hired the diligence of a private research firm to prepare a report on GFG in 2018, due to growing concerns about the group’s liquidity.
This was a year before a spy scandal struck the bank. This ultimately sinks the exit for Tijanetiam, the CEO of Credits Wisdom. The bank had ordered the Absiant private investigator to spy on Iqbal Khan, the head of Iqbal Khan, after resigning to move to UBS.
Credit Suisse collapsed in March 2023 and was taken over by Arch-Rival UBS© Fabrice Coffrini/AFP.
Investigators’ GFG report raised several red flags regarding Gupta’s business, including allegations of private related party transactions and allegations of participation in “carousel fraud,” according to FINMA’s ruling.
GFG was later investigated by a serious fraud office in the UK, but denied any fraud. GFG declined to comment.
Gupta’s plans to reduce funding exposure to businesses were discussed earlier in December 2018. In the same month, the bank’s compliance officer shared the findings of a report from a colleague and a private investigator.
Lex Greensill has created a series of pledges to reduce Gupta’s exposure, telling Credit Suisse executives: However, FINMA has discovered that Australians “pressure portfolio management to buy bonds that actually increase exposure.”
Employees frequently expressed vigilance for their continued exposure to funds in Gupta’s business, with one senior executive emailing colleagues.
“I don’t know if that’s very encouraging.”
The FINMA file also shed light on the bank’s attempts to grasp Greensil’s practice of funding so-called “future claims,” a hypothetical term for future bills for transactions that have not yet been agreed upon.
Recommended
FINMA discovered that Credit Switzerland is “not in a position to distinguish and monitor future and actual accounts receivables,” but found that reference to the term was not featured in the fund’s documents or marketing materials.
One employee who asked a senior colleague about future accounts receivable funding practices was told in April 2020 that “all great” was because the issue was being discussed with Lex Greensill. The employee replied: “Hmm. I don’t know if it feels very encouraging now.”
Greensill collapsed in March 2021 less than a year later. Two years later, Credit Suisse continues.
