Lawsuit filed against Credit Suisse for VelocityShares TVIX ETNs debacle

May 30th, 2012 | By | Category: Alternatives / Multi-Asset

Credit Suisse has found itself on the end of a class action lawsuit following the dramatic collapse in the price of VelocityShares Daily 2x VIX Short Term ETNs (TVIX) earlier this year.

Lawsuit filed against Credit Suisse for TVIX ETNs debacle

The Credit Suisse-issued VelocityShares Daily 2x VIX Short Term ETNs lost approximately 60% in just two days in March.

Wolf Haldenstein Adler Freeman & Herz, a New York-based law firm, has filed a class action lawsuit against the investment bank on behalf of certain investors who purchased Credit Suisse-issued VelocityShares Daily 2x VIX Short Term ETNs linked to the S&P 500 VIX Short-Term Futures Index (TVIX ETNs).

The action covers investors who held TVIX ETNs through and including 22 March, 2012, thereby suffering economic damages, after the price of the TVIX ETNs fell approximately 60% in two days, despite relatively benign trading conditions elsewhere in the market.

Wolf Haldenstein Adler Freeman & Herz details that on 21 February, 2012, Credit Suisse announced that it temporarily suspended further issuances of the TVIX ETNs due to “internal limits” reached on the size of the ETNs. As a result of the suspension, shares of TVIX subsequently traded at prices uncorrelated to the S&P VIX Short-term Futures index – the index that the ETN was designed to track through the use of VIX futures. This “disconnect” lasted for approximately one month.

Then, on 22 March, 2012, shares of TVIX declined in price by over 29% as rumours leaked into the market that Credit Suisse was considering whether to recommence issuance of the ETNs. That evening, Credit Suisse announced that it would in part reopen issuance of TVIX shares on a limited basis and on 23 March, 2012, shares of TVIX declined further by almost 30% resulting in significant losses for long investors.

Wolf Haldenstein Adler Freeman & Herz claim that the official offering documents used to solicit purchases of TVIX ETNs materially understated certain risks associated with these investments. In addition, they claim that Credit Suisse also misleadingly omitted to disclose necessary information and material risks of certain scenarios transpiring that might lead to large losses from investments in TVIX ETNs.

The law firm, which has also launched a case against Facebook, relating to its recent IPO, seeks to recover damages on behalf of all holders of TVIX ETNs during the class action period.

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