Richard Desmond has filed a massive lawsuit against investment bank Credit Suiss. Claiming he was sold an incomprehensibly risky derivatives product without the proper knowledge or disclosures, the media mogul is seeking £19m in damages from one of the world’s largest banks. According to the legal documents filed alongside the claim, this isn’t just a case of sour grades. Desmond claims that Credit Suiss engaged in fraudulent misrepresentation, a breach of fiduciary duty, and an abuse of a host of different financial regulations. At the heart of Desmond’s case is the claim that without the malfeasance of the bank, he’d have never placed the risky derivatives swap that cost him a small fortune.

Credit Swiss Interest Rate Swap Deal

Unwrapping the deal: Back in 2007, Desmond claims he engaged in an interest rate derivatives swap worth upwards of £50m. That deal was done through a hedge fund offered by GLP Partners, and Desmond’s looking to have the trade invalidated in light of the information. At the very least, he’s seeking a return of the amount that he lost in the bad deal.

An unsophisticated investor:Though Desmond is worth just more than £200m, he claims that he was an unsophisticated investor who was duped into taking on a bad product. Some within the financial industry are dubious over the investor’s claims, noting that individuals do not amass that sort of wealth without some knowledge of the markets and derivatives trading. To his credit, Desmond admits that though he has had success in many different areas of business, expertise stops well short of complex investments. ( See Sophisitcated Test )

His claim is that Credit Suiss saw his vulnerability and took full advantage of it by failing to disclose certain important facts. He also claims that the bank outright misrepresented certain aspects of the deal, painting a picture that was much different from the reality in which he actually invested.

In legal papers filed in court, Desmond’s lawyers argued that the transaction included details that would have been over the head of the majority of people not directly involved in this complicated industry. Those same papers claimed that the deal included performance risks that could not have been readily evident to someone in Desmond’s position or someone with Desmond’s knowledge. The goal of these filings is to prove that Desmond, though he had a tremendous amount of capital to put into play, was the sort of investor who could have been lied to in a deal like this.

Desmond’s venture into hedge funds: One of the most important aspects of the deal revolves around Desmond’s access to the GLP hedge funds. Though his purchase was complicated, one of the things that was well known was making such a purchase would give him access to some of the gains made by the GLP hedge fund. This, experts say, shows that Desmond knowingly took on tremendous risk in order to tap into the high potential returns that are often brought back by high-end hedge funds. This complicates matters for the mogul’s lawyers, and it makes him appear to be a far more educated investor than he claims to be.

Still, Desmond argues that he would have never invested close to one fourth of his total net worth on a deal that presented so many clear risks. Had these things been known to him, he would have made the rational choice to pass on a deal that might have left him financially vulnerable to a number of volatile outcomes.

Facing this huge lawsuit, the leadership at Credit Suiss has refused to comment. They are, however, fighting Desmond’s claims with zealousness in front of the courts.


Interest Rate Swap Information

 

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An interest rate swap arrangement (IRSA) is a complex derivative product that is sold together with a business loan to ensure that small businesses will be shielded from increases in interest rates. However, technically speaking, it is not an insurance policy.

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Interest Rate SWAP Claims

Maple Leaf Financial have a specialist team of solicitors dedicated to dealing with the mis-selling of interest rate swap protection products by the banks. We are happy to review these relatively complex swap arrangements and to claim compensation for our clients where appropriate.

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Do i qualify as “non-sophisticated” for an Interst Rate Swap Claim?

The Financial Conduct Authority (FCA), previously the Financial Services Authority (FSA) has created a set of questions and answers to determine whether a customer who was sold an interest rate swap product qualifies as “non-sophisticated” and therefore eligible to make an interest rate swap claim.

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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.