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December 27, 2021

Credit Suisse to sue SoftBank over Greensill fiasco

Credit Suisse is reportedly planning to file a lawsuit against Japanese investor SoftBank to recoup funds related to its Greensill supply chain finance funds.

The legal tussle is related to $440m in funds that US construction company Katerra, backed by SoftBank, owes to the Swiss bank’s customers.

Katerra filed for bankruptcy earlier this year with $1bn to $10bn in liabilities.

The firm cited “the unexpected bankruptcy filing of Katerra’s former lender” as one of the reasons for its collapse.

Katerra secured $440m loan from Greensill, with the debt sold to Credit Suisse funds as low-risk investments.

The Swiss lender then sold these funds to its affluent customers.

These funds eventually grew over $10bn in size and were suspended by the bank in March this year.

Last year, the Japanese investor agreed to offer emergency funds to Greensill to cover the debts at Katerra; however, the investment never reached the Credit Suisse funds, Financial Times had revealed earlier.

The Swiss bank has now approached a US court and filed a section 1782 discovery to find out what executives at SoftBank knew about the deal and gain access to documents exchanged between SoftBank and Katerra. Credit Suisse’s lawyers claim that SoftBank orchestrated Katerra’s financial restructuring, which saw Greensill offer $440m for an equity stake in Katerra, the publication said citing sources.

“In other words, SoftBank orchestrated a deal wherein Greensill purported to give up its rights to the $440m outstanding . . . even though it was [Credit Suisse] who ultimately stood to lose by virtue of that deal. Nevertheless, no one informed [Credit Suisse] that this series of events were occurring,” the filing said.

“No SoftBank entity was a formal party to the [deal], but there can be no question that SoftBank was aware of it,” it added.

Greensill blow-up: Background

Credit Suisse, a creditor for financial services firm Greenshill Capital, was caught in a tight spot after the latter became insolvent.

The Swiss bank was involved in selling nearly $10bn of Greensill-created securities through its asset management arm.

What followed are a series of investigations into the role of its executive board members, including its CEO Thomas Gottstein, dismissal of some employees, and splitting of its asset management unit from international wealth management arm.

The bank’s headquarter was also raided by the Swiss police in connection with the fund scandal.

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