Additional lawsuits from CS takeover: This pile of lawsuits could cost UBS billions

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This list has it all: UBS listed all ongoing or recently concluded legal disputes in 13 pages in its quarterly report. The cases are complex and, in some cases, have been ongoing for more than a decade.

With the acquisition of Credit Suisse, UBS also took many new legal disputes into its own hands. Depending on the outcome, the megabank could face billions of dollars in fines. Blick summarizes the cases and their current situation.

The French judiciary accuses UBS of helping wealthy French clients evade taxes and launder money for years. Investigations against UBS and former employees have been ongoing since 2013. In 2021, the appeals court imposed a fine of 3.75 million euros, confiscation of 1 billion euros and compensation of 800 million euros to the French state. The bank also objected to this. Negotiations before the Supreme Court have been completed. The bank is expected to announce the decision on November 15. At the end of September, the bank had 1.1 billion euros in provisions for the event on its books.

In 2007, the real estate business in the US collapsed like a house of cards full of highly speculative mortgages and securities. UBS was one of the biggest players in this business from 2002 to 2007 and later faced a lawsuit. In August 2023, the big bank managed to reach a settlement with the US Department of Justice. Cost: $1.435 billion. According to its own information, UBS has already allocated the corresponding amount to reserves and it has no impact on current business figures.

This was one of the biggest financial scandals in history: Stockbroker Bernard Madoff (1938-2021) embezzled a total of $65 billion over decades. Lawsuits were filed against UBS, UBS subsidiaries and several other banks. This relates to the role that financial institutions play as promoters, distributors or custodian banks. However, to date, almost all cases have been rejected. Most recently by the US Supreme Court in 2019. The case is currently in bankruptcy court for further proceedings. There is currently little to suggest UBS will be fined. No provisions were stated in the quarterly report.

After the 2008 financial crisis, a banking cartel manipulated foreign exchange, Euribor and Libor reference interest rates, and bonds for years. UBS pleaded guilty early and paid $1.5 billion to American authorities more than a decade ago. The Federal Financial Market Supervisory Authority also collected 134 million francs from the big bank. In 2021, EU competition authorities imposed another fine of 172.4 million euros, which UBS transferred to the next stage. Exit: still open.

UBS states that the amount of possible further payments cannot be determined in this case. These may be larger or smaller than the provisions made. There are also pending cases in the CS in connection with the Libor manipulation.

In 2012, the Swiss Federal Court ordered UBS to refund distribution fees to customers billed through third-party companies. Some cases involving affected companies are still under review. The issue is whether the relevant contracts contain a valid fee waiver. UBS writes that the balance sheet dated September 30 includes the provisions it deems appropriate. But the bank also notes that payments could ultimately be “significantly higher or possibly lower” than the provisions.

CS also sold junk mortgages during the subprime crisis in the US. The bank reached a $495 million settlement with the New Jersey Attorney General’s Office last year. The bank had prepared the relevant provisions.

Credit Suisse was forced to pay a billion-dollar fine in 2014 for aiding and abetting tax evasion in the US and has committed itself to no longer helping US citizens hide their assets. A March 2023 U.S. Senate report casts doubt on whether the bank complied. The lawsuit could be costly for UBS.

CS and some other financial institutions have been accused of colluding to avoid certain trading platforms when trading over-the-counter. The defendants, including CS, reached an agreement with some of the plaintiffs. Additionally, the courts dismissed most of the cases. But a few are still open.

A former account manager for Credit Suisse invested huge sums in individual products, prompting clients to sue. The counselor was convicted. In September 2023, a Singapore court ruled that CS must pay $743 million in damages, excluding interest. The bank objected. He was fined $607 million in a case in Bermuda and an appeal is ongoing. A civil lawsuit was finally filed in March 2023.

According to the Swiss Financial Market Supervisory Authority (Finma), Credit Suisse seriously violated organizational requirements and money laundering reporting obligations in transactions with state-owned companies in Mozambique. The big bank agreed to a payment of almost $475 million with the US judiciary as early as 2021. Reached an agreement with the People’s Republic of Mozambique in September 2023.

In Great Britain, the Netherlands, France and Belgium, monetary transactions of CS clients across national borders are controlled. The bank has already checked data for some countries and continues to work with authorities, according to the quarterly report.

The class plaintiffs hold CS and other banks responsible for losses in the stock market, including short-selling business. Many lawsuits have been filed since 2018. So far the courts have rejected all cases. An appeal was filed in June 2023.

In the summer of 2022, the Federal Criminal Court sentenced the CS to pay 19 million francs in compensation to Bulgarian drug traffickers for money laundering. The bank objected to this situation.

CS is said to have breached regulatory requirements in its supply chain business in the Greensill scandal. Finma discovered the illegal behavior in February 2023. The Zurich prosecutor’s office initiated criminal proceedings against former and active CS employees in May. Various investors sued CS.

Archegos Capital had gambled billions of dollars on margin stock bets. The damage caused reaches 10 billion dollars. CS completely failed in risk management and hence wasted huge client assets. UBS was able to settle the case this summer with a $387 million fine. However, other civil lawsuits were also filed against CS.

Following CS’s emergency rescue, multiple class action lawsuits were filed against the bank in the US. CS is accused of providing misleading information about customer outflows, controls in financial reporting and serious errors in risk management. The quarterly report states that the bank is working with authorities. CS also faces several class-action lawsuits filed by shareholders who feel cheated in the takeover deal.

Source :Blick