Credit Suisse to Pay $495M in U.S. to Settle “Deceitful” Securities

Published: 18 October 2022

Credit Suisse ZurichThe half-a-billion settlement comes as the latest blow to the secretive bank’s reputation after a turbulent summer. (Photo: Suw Charman-Anderson, Flickr, License)

By Inci Sayki

Credit Suisse has agreed to pay US$495 million to settle a case related to the sale of mortgage-backed securities in the U.S., which contributed to the 2008 financial crisis.

New Jersey Attorney General, which announced the settlement on Monday, said the lender made fraudulent and deceitful representations of the risks of the mortgage backed securities from 2006 to 2007 in the run-up to the 2008 financial crisis.

In a 2013 filed lawsuit, the attorney general’s office alleged over $3 billion in damages from the Swiss bank’s involvement.

“This agreement in principle holds Credit Suisse accountable for the loss of billions of dollars that helped put the nation in financial crisis,” said First Assistant Attorney General Lyndsay Ruotolo.

Ruotolo added that the settlement of the decade-long probe and litigation will “provide meaningful financial relief to investors nationwide who were left holding the bag in the fallout from Credit Suisse’s conduct.”

The attorney general's office said the Swiss bank sold the “toxic” mortgage-backed securities to hundreds of institutional investors, including pension funds, hospitals, and charities throughout the U.S. from its offices based in Princeton, New Jersey.

Credit Suisse will neither admit nor deny the state’s allegations as part of the expected settlement.

The lender said on Monday that it was “pleased to have reached an agreement” that allows the bank to resolve its only remaining mortgage-backed securities matter involving claims by a regulator, the largest it encountered.

Prior to Monday’s payout, the Swiss bank settled multiple residential mortgage-backed securities lawsuits with U.S. authorities that played a key role in spiraling the 2008 financial crisis; including a $5 billion settlement with the U.S. Department of Justice in January 2017.

The settlement is the latest legal woe to hit one of Switzerland’s biggest bank’s reputation after a turbulent summer.

Credit Suisse was fined over $20 million in June by a Swiss court for failing to prevent a Bulgarian crime ring from laundering money related to cocaine trafficking, and in July its CEO Thomas Gottstein resigned after two and a half years on the job.

The secretive bank and its clients have also been the center of attention following a leak of documents in February, which lead to the Suisse Secrets investigative series OCCRP was part of.