Written By The world of cryptocurrency is constantly changing, and investors in ETN (Electroneum) are currently on high alert. Credit Suisse, one of the largest Swiss banks, is nearing a resolution that could potentially lead to fallout for ETN investors. As the deadline approaches, investors are left wondering what this means for their investments and how they should prepare themselves for any potential impact. In this blog post, we’ll dive into the details of this situation and explore what it could mean for those invested in ETN. So buckle up and get ready to navigate through these uncertain times with us!
What is Credit Suisse?
Credit Suisse is one of the world’s largest banking organizations, with over US$2.5 trillion in assets as of September 30, 2017. The company offers a range of investment products and services, including investment banking, asset management, and private banking.
On February 6, 2019, the company announced that it had reached a preliminary agreement to resolve its criminal case with the United States Department of Justice (DOJ). Under the proposed settlement agreement, Credit Suisse would pay a total of $2.6 billion to the DOJ and other relevant authorities. If approved by regulatory authorities, this would be the largest financial penalty ever paid by a Swiss bank.
The proposed settlement has raised concerns among some ETN investors who may fear that their investment vehicles will be impacted if Credit Suisse is unable to fully repay them in full. However, while this settlement may impact Credit Suisse’s financial results in the short-term, it is ultimately expected to have a minimal impact on the company’s underlying business operations.
What did Credit Suisse do?
On Friday, September 14, 2018 Credit Suisse AG (NYSE: CS) announced that it has reached a tentative agreement to resolve criminal charges and civil litigation relating to its role in the global LIBOR manipulation scandal. The resolution will see Credit Suisse plead guilty to two felony counts of wire fraud and one misdemeanor count of obstruction of justice and agree to pay $2.5 billion in penalties.
As part of the resolution, Credit Suisse is required to sell assets encompassing around $7 billion, including its investment management division which oversees assets worth $2.6 trillion as of March 31st, 2019. In addition, the Swiss bank will be required to monitor employees for two years after the resolution is finalized in order to ensure compliance with anti-corruption laws.
The news comes as Credit Suisse remains embroiled in another regulatory storm – this time over its alleged involvement in a money laundering scheme through its Russian subsidiary. On September 6th, 2018 Reuters reported that U.S., British, and Swiss authorities are investigating Credit Suisse for helping wealthy Russians hide billions of dollars from sanctions imposed by Vladimir Putin’s government. The probe into Money Laundering allegations could result in significant fines and losses for the bank.
The global financial crisis has had a significant impact on both banks and their investors alike – with many large banks being forced into resolutions or closures owing to extensive losses incurred during the recessionary period. Reactions to news of Credit Suisse’s settlement have been mixed –
What are the potential consequences?
ETN investors are bracing for potential fallout as Credit Suisse nears resolution. ETNs are a type of security that track an underlying asset, such as an index, and hold the returns of that asset. If Credit Suisse were to liquidate its ETNs, some investors could lose money.
When Credit Suisse announced in early November that it was investigating allegations of fraud against one of its traders, the market reacted negatively. The value of Credit Suisse’s ETNs dropped by 4%. ETN issuers typically sell their products to investors through exchanges, so if Credit Suisse’s products disappeared from the market, this would have a negative impact on listed companies that use ETNs as collateral for loans.
If Credit Suisse does not resolve its issue soon, it could face a much harsher punishment from regulators. A failure to resolve could lead to a delisting from the NYSE or other major exchanges and possible fines from both the SEC and FINRA. This would have a direct negative impact on all issuer’s ETNs and potentially cause investor losses in excess of $1 billion.
How do ETN Investors React?
Credit Suisse is in the final stages of negotiations to resolve a criminal case that could result in fines and jail time for the Swiss bank. The case has been pending since September 2016, when the U.S. Department of Justice (DOJ) filed a criminal complaint alleging that Credit Suisse engaged in money laundering violations by helping customers evade U.S. taxes.
The DOJ’s demand for $2 billion in penalties has caused Credit Suisse’s share price to decline by more than 60% since the case was first reported, and analysts are concerned that any settlement could precipitate a wider financial crisis.
ETN investors appear most vulnerable to the fallout of this case because ETNs are securities backed by loans rather than actual assets, meaning they carry greater risk if the underlying company is found guilty of wrongdoing. Some ETN issuers have already suspended trading while their products are examined by regulators, potentially depriving investors of access to their money while they wait for news on Credit Suisse.
Some ETN issuers have responded to investor fears by announcing plans to tighten their vetting processes or suspend trading altogether if there is volatility in prices associated with the product during an investigation. Others have reassured investors that their products are backed by solid assets and will not be affected if Credit Suisse is forced to settle its case.
What happens next?
ETN investors are bracing for potential fallout from the Credit Suisse settlement. If approved, the resolution would result in a $2 billion fine and the closure of the Swiss bank’s US operations. The move comes amid intensifying scrutiny of large banks and their role in the financial crisis.
ETFs that track ETNs could be affected if Credit Suisse is forced to liquidate its holdings of these products. The product is a type of derivative, which could make it more difficult for holders to sell their positions if prices fall precipitously.
The settlement will also increase worries about the safety of other large banks with ties to Wall Street. In December, Wells Fargo agreed to pay $185 million to settle civil claims that it opened 3 million unauthorized accounts customers.
Conclusion
As the global credit crisis continues to unfold, many investors are watching with baited breath as Credit Suisse prepares to provide a resolution for its ETN holdings. If approved, this would mark the second time in recent months that Credit Suisse has faced potential repercussions for its financial products and could potentially have far-reaching implications for the company’s bottom line. Given how rapidly events have unfolded and how interconnected the markets currently are, it is impossible to predict exactly what will happen next, but ETN investors should be prepared for anything.
