Credit Suisse Group AG
- Company Name
- Credit Suisse Group AG
- Stock Symbol
- Class Period
- January 29, 2018 to February 5, 2018
- Motion Deadline
- May 13, 2018
- Southern District of New York
The complaint charges Credit Suisse and certain of its officers with violations of the Securities Exchange Act of 1934. Credit Suisse is a multi-national financial services holding company with one of its four primary divisions focused on investment banking. The Company is based in Switzerland with its principal U.S. offices in New York, New York.
In 1993 the Chicago Board Options Exchange (“CBOE”) created a measurement of the market expectations of near-term volatility conveyed by the S&P 500 Index options price called the CBOE Volatility Index (“VIX Index”). The CBOE calculated the VIX Index based on the real time pricing of S&P 500 Index put and call option contracts by averaging the weighted prices of such options over a wide range of strike prices. Futures contracts on the VIX Index were created and made available to investors so they could invest in forward volatility based on their assessment of the future movement of the VIX Index.
Exchange traded notes (“ETNs”) are unsecured debt obligations of financial institutions with return based on the performance of an underlying index. Inverse ETNs are similar, but their value is calculated using the inverse of the performance of the underlying index. The VelocityShares Daily Inverse VIX Short Term exchange traded notes (“Inverse VIX Short ETNs”) are inverse ETNs based on the performance of the underlying S&P 500 SPVXSP Index, which seeks to model the outcome of holding long positions in VIX futures.
Credit Suisse issued Inverse VIX Short ETNs through multiple offerings, with the last offering issued through a January 29, 2018 pricing supplement.
The complaint alleges that during the Class Period, defendants were actively manipulating the Inverse VIX Short ETNs by liquidating Credit Suisse’s holdings in various financial products to avoid a loss to the detriment of investors.
On February 5, 2018, at the close of the market, Inverse VIX Short ETNs closed at $99 per share. By 6:28 pm, however, the price per Inverse VIX Short ETN had declined to a low of $10.16, a drop of approximately 90%. Then on February 6, 2018, Credit Suisse announced that an Acceleration Event (which would be triggered “if at any point, the Intraday Indicative Value is equal to or less than twenty percent (20%) of the prior day’s Closing Indicative Value”) had occurred intraday on February 5, 2018, and that the “last date of trading for [Inverse VIX Short ETNs] is expected to be February 20, 2018. As of the date hereof, Credit Suisse will no longer issue new units” of the ETNs. Later on February 6, 2018, Credit Suisse disclosed that it had experienced “no trading losses” from the Inverse VIX Short ETNs, even though Credit Suisse held significant amounts of short volatility financial products, including the VIX futures.