Credit Suisse Risks Backlash From Investors in Greensill Funds

Credit Suisse Group AG risks a backlash from investors set to face potential losses after the bank was forced to freeze Luxembourg funds linked to financier Lex Greensill, according to a company that funds investment-recovery litigation.

Credit Suisse continued to market the biggest of the funds as a fully insured, low-risk product despite a decision by insurers last summer not to renew coverage, said Edouard Fremault, a partner at Deminor in Brussels. He said his firm has already been approached by around 10 investors risking losses of about 60% and is reviewing options including potential lawsuits.

“If you’re the promoter of a fund, don’t you think that you have the duty to inform your clients that the risk profile of your product has dramatically changed,” said Fremault. “It’s black or white, insured versus non-insured.”

Credit Suisse froze the funds last week after doubts emerged about the valuations of some of the assets, kicking off a chain of events that culminated in the collapse of Greensill Capital. The bank is now liquidating the strategy, a group of short-term debt funds for which Greensill had provided the assets and which had been held up as a success story as recently as December. The money pools are returning most of their cash and equivalents, though about two-thirds of investor money remains tied up.

Credit Suisse was not informed of any insurance cancellation until very recently, the Swiss bank said in an investor update published on Tuesday. A spokesman declined to comment further.

The fund in question, called Credit Suisse (Lux) Supply Chain Finance Fund, was promoted as fully insured and this played a key part in the investors’ decision to choose it as a safe option, Fremault said.

“Investors were not informed that the insurance companies decided during the summer 2020 that they would no longer insure the underlying receivables with effect as from March 1,” Fremault said.

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