The New Jersey Attorney General announced today that it reached a $495 million agreement with Credit Suisse for the sale of toxic residential backed securities in the run-up to the 2008 financial crisis.
The lawsuit, filed in Superior Court, Chancery Division, Mercer County, alleges that the Swiss bank packaged billions of dollars’ worth of defective residential loans into publicly traded RMBS, which were sold to unsuspecting investors through materials containing misrepresentations about the quality of the loans.
The state also alleged that Credit Suisse failed to disclose information involved with underlying mortgages, which is in violation of New Jersey’s securities laws. Additionally, Credit Suisse will pay a penalty fee of $100 million.
Once final, the settlement will be one of New Jersey’s largest civil recoveries in the state’s history, and will include, among other things, approximately $300 million in compensation for investors nationwide.
According to the agreement, Credit Suisse perpetrated much of the fraud from its office in Princeton, New Jersey, which included the business of selling the toxic RMBS to hundreds of institutional investors nationwide, including public and private pension funds, charities, educational institutions, mutual funds and hospitals, who in turn invested the retirement funds of workers and the savings of individual retail investors.
Credit Suisse neither admits nor denies these allegations as part of the anticipated settlement.
“This agreement in principle holds Credit Suisse accountable for the loss of billions of dollars that helped put the nation in a financial crisis,” said First Assistant Attorney General Lyndsay V. Ruotolo. “It has taken more than a decade of investigation and litigation to reach this historic result, but we never wavered in our resolve to get here. The recovery Credit Suisse has agreed to pay reflects the magnitude of harm it inflicted on the public and underscores New Jersey’s commitment to vigorously pursue cases, no matter the challenges, to protect the financial interests of the investing public.”
“This settlement will provide meaningful financial relief to investors nationwide who were left holding the bag in the fallout from Credit Suisse’s conduct. It also sends a clear message that we will not allow New Jersey to be used as a base of operations for unlawful schemes targeting investors,” said Acting Bureau Chief Amy G. Kopleton. “The Bureau will continue to protect the integrity of New Jersey’s financial services industry by bringing cases against firms that unlawfully drive up profits by withholding vital information about the products they sell.”
This action is a mere follow-up from when Credit Suisse paid more than $5 billion to settle with the Justice Department over its alleged practices in 2017. In January 2021, Credit Suisse said it would take $850 million in RMBS-related provisions in an effort to repair its legacy legal cases. Some of that went toward settling a separate, $600 million case.
"Credit Suisse is pleased to have reached an agreement that allows the bank to resolve the only remaining RMBS matter involving claims by a regulator and the largest of its remaining exposures on its legacy RMBS docket. The settlement, for which Credit Suisse is fully provisioned, marks another important step in the bank’s efforts to pro-actively resolve litigation and legacy issues," the company said in a press release.
