(Bloomberg) — Credit Suisse Group AG’s former prime brokerage co-head was awarded a little more than $590,000 by an arbitration panel after being fired following the collapse of Archegos Capital Management, though he originally sought more than $100 million from the bank.
Ryan Nelson revealed his March 2024 award Monday in a Manhattan federal court filing seeking to enforce it. He had asked a Financial Industry Regulatory Authority panel to grant him at least $7 million in compensatory damages and at least $100 million for reputational harm and lost future income. But the arbitrators determined that Credit Suisse was liable for far less. They didn’t state reasons for their decision.
Arbitration proceedings are confidential, so Nelson’s court filing offers a rare window on the fallout for a senior Credit Suisse banker who worked with Bill Hwang’s family office. Credit Suisse was Archegos’ largest counterparty, and its roughly $5 billion in losses contributed to the bank’s own 2023 demise and subsequent merger into UBS Group AG.
The prime services unit that Nelson headed with John Dabbs handled Archegos’ trades, ultimately extending it billions of dollars on margin. An internal report Credit Suisse commissioned after the Archegos collapse largely focused on the unit’s failures, saying it showed a “lackadaisical attitude towards risk and risk discipline.”
Nelson’s lawyer declined to comment. A spokesperson for UBS also declined to comment.
In addition to the damages award, the Finra panel recommended that the explanation of Nelson’s termination submitted to the regulator be replaced.
“Mr. Nelson was one of nine employees terminated, not for cause, in August 2021, after it became known that a business unit in which they held various executive positions sustained substantial financial losses,” the panel said the explanation should read. It’s not clear what the previous language was.
Hwang was found guilty last July of orchestrating a scheme to mislead his bank counterparties into providing Archegos with billions of dollars in trading capacity that inflated the value of his portfolio until the bubble burst in March 2021. UBS, Morgan Stanley and Nomura Holdings Inc. are among the other banks that suffered significant losses from trading with Archegos. Hwang was sentenced to 18 years in prison in November.
Lawyers for Hwang had hoped to argue at trial that risk management failings at Credit Suisse and other banks meant they was at fault for their own losses, but the judge largely sided with prosecutors in barring a “blame the victim” defense.
Archegos’ former chief financial officer, Patrick Halligan, who was tried alongside Hwang, received eight years in prison in January for defrauding banks.
The case is Nelson v. Credit Suisse Securities (USA) LLC, 25-cv-1980, US District Court, Southern District of New York.
–With assistance from Noele Illien.
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