(Bloomberg) -- A U.S. retirement fund sued current and former board members of Credit Suisse Group AG for alleged risk management failings over the collapse of Bill Hwang’s hedge fund Archegos Capital Management.
The fund named in its lawsuit much of the current board as well as a former chairman, head of risk and investment bank chief, among more than a dozen defendants. They failed to act against “reckless conduct” at the bank’s prime brokerage unit that contributed to billions of dollars in losses, according to the suit, filed Tuesday in New York state court.
The Employees Retirement System for the City of Providence filed the complaint as a derivative action on behalf of all shareholders “to redress injuries that the corporation suffered and will suffer as a direct result” of the alleged failure of oversight, according to the suit. The Rhode Island fund seeks damages on behalf of the investors and a declaration that the defendants breached their fiduciary obligations to the Zurich-based bank.
Read More: Bill Hwang Archegos Catastrophe Was Wilder Than Anyone Knew
A spokeswoman for Credit Suisse declined to comment on the lawsuit. A lawyer for the fund didn’t immediately respond to a voice mail.
Credit Suisse was left holding the bulk of the losses after Archegos’s highly leveraged bets on a handful of stocks imploded last year, shaking Wall Street and triggering regulatory probes. The losses dealt Credit Suisse its worst year since the financial crisis, prompting a significant overhaul of management and a board shakeup.
Because of a “failure to adopt and implement basic modern risk management structures and processes, CS suffered $5.5 billion in losses due to Archegos alone, not to mention extensive harm to its reputation and goodwill,” the fund said, adding that the bank also failed in relation to lender Greensill Capital.
Archegos founder Hwang and former chief financial officer Patrick Halligan were arrested Wednesday by U.S. officials. Both pleaded not guilty to 11 criminal charges, including racketeering conspiracy, market manipulation, wire fraud and securities fraud. Among the government’s allegations was that they misled banks about their market positions.
Read More: Archegos ‘Duped’ the Biggest Banks on Wall Street, Feds Say
Separately, shareholders at the bank’s annual general meeting on Friday voted not to absolve the Credit Suisse board of legal liability for mistakes made in the run-up to the Archegos debacle. But they decided to strike down a proposal by the Ethos Foundation, seven Swiss pension funds and a Norwegian sovereign wealth fund for a special audit over the collapse of a $10 billion group of supply chain finance funds the bank ran with now-defunct Greensill, after Credit Suisse refused to publish an internal report on the matter.
The case is Employees Retirement System for the City of Providence v. Urs Rohner at al., 651657/2022, New York State Supreme Court (Manhattan).
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