Credit Suisse investors who saw more than CHf4.5 billion of bonds wiped out during last month’s government-led emergency merger with UBS are suing the Swiss financial regulator.

This is the first major lawsuit in the public domain over the regulator’s decision to render around $18 billion worth of Credit Suisse’s Additional Tier 1 (AT1) debt worthless during the rescue deal. The move by Switzerland’s Financial Market Supervisory Authority (FINMA) shocked the markets and raised alarm bells for both investors and litigators.

A month later, law firm Quinn Emanuel Urquhart & Sullivan is seeking redress for clients whose assets it argued had been expropriated during the takeover.

In a statement on Friday, Quinn Emanuel's Swiss managing partner Thomas Werlen said: "We are committed to rectifying this decision, which is not only in the interests of our clients but will also strengthen Switzerland's position as a key jurisdiction in the global financial system.”

FINMA and Credit Suisse have declined to comment so far, with Switzerland’s status as a stable investment market currently suffering a major blow.

For its part last month, FINMA said that the decision to impose losses on bondholders was legal and that emergency government legislation allowed for a total write-down in a ‘viability event’.

It is important to note that the investments were in AT1 bonds, which were engineered in the wake of the 2008 financial crisis to ensure that investors carry the burden of risk for a bank as opposed to tax holders. Credit Suisse bondholders however have been seeking legal advice as the rescue went against the precedent of prioritising bondholders over shareholders.

A number of claims have already been filed in Switzerland over the Credit Suisse-UBS deal, though the Quinn Emanuel Urquhart & Sullivan case is the most public to date.

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