Gana LLP Investigates Alleged Fraudulent Activity Related to Credit Suisse’s TVIX Notes

Gana Weinstein LLP, a full-service nationally recognized securities litigation firm, is investigating Credit Suisse Securities (USA) LLC for underwriting and VLS Securities, LLC (VLS) for marketing the VelocityShares Daily 2x VIX Short Term Exchange Traded Notes (TVIX). According to TVIX’s offering documents and marketing materials, TVIX was linked to twice the daily performance of the S&P 500 VIX Short-Term Futures Index. The offering documents stated that TVIX was designed for investors who seek exposure to the applicable underlying index.

TVIX do not represent ownership in any basket of securities, instead TVIX acts as a debt instrument that is supposed to track an index and on which the issuer pays the note based on the terms of the offering documents. As a result, investors may receive a cash payment at maturity. TVIX began trading on November 30, 2013  at a $100 per share price. On February 21, 2012, Credit Suisse temporarily suspended the issuance of new shares of TVIX, due to internal limits reached on the size of TVIX, according to Credit Suisse.

On March 22, 2012, the TVIX shares decline in price by over 29% as rumors were circulating that Credit Suisse was considering whether to begin reissuing shares of TVIX. On March 23, 2012 after Credit Suisse announced that it would reopen issuance of TVIX, the shares dropped another 30% in value.

On July 16, 2012, a class action was filed in the Southern District of New York alleging that Credit Suisse, among others violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 for making material misrepresentations in TVIX’s offering documents. Specifically, the complaint asserts that Credit Suisse failed to disclose material information concerning the probability that TVIX could dislocate from the relevant index, that Credit Suisse failed to disclose material information regarding its practices and procedures about its internal issuance limits, among other claims.

Several FINRA actions have been filed against Credit Suisse as well. At least one of these cases has further alleged that the TVIX Pricing Supplement dated November 29, 2010 is replete almost two dozen distinct misrepresentations related to TVIX’s tracking of the Short-Term Futures Index. Sone examples of the representation made in the Pricing Supplement are:

  • “We are offering six separate series of exchange traded notes (collectively, the “ETNs”) [including] the VelocitySharesTM Daily 2x VIX Short Term ETN linked to the S&P 500 VIX Short-Term FuturesTM Index due December 4, 2030 . . . .”
  • “The ETNs are designed for investors who seek exposure to the applicable underlying index. . . . For each ETN, investors will receive a cash payment at maturity, upon early redemption or upon acceleration by us that will be linked to the performance of the applicable underlying index . . . .”
  • “The ETNs are medium-term notes of Credit Suisse AG (“Credit Suisse”), the return on which is linked to the performance of either the S&P 500 VIX Short-Term FuturesTM Index ER or the S&P 500 VIX Mid-Term FuturesTM Index ER . . . .”
  • “The return on the ETNs of any series will be based on the performance of the applicable underlying Index during the term of such ETNs. Each series of ETNs tracks the daily performance of either the S&P 500 VIX Short-Term FuturesTM Index ER or S&P 500 VIX Mid-Term FuturesTM Index ER . . . .”
  • “The return on each series of ETNs is linked to the performance of an applicable underlying Index which, in turn is linked to the performance of one or more futures contracts on the VIX Index.”
  • “The ETNs may be a suitable investment for you if . . . [y]ou seek an investment with a return linked to the performance of the applicable underlying Index.”
  • “Two of the most important factors that will affect the value of your ETNs are the directional change in the level of the applicable underlying Index (either up or down) and the annualized volatility of the applicable underlying Index itself.”

If you invested in the TVIX Exchange-Traded Note (ETN) and want to explore your legal options, you should contact Gana Weinstein LLP. We have extensive experience representing investors in claims of fraud, material misrepresentations, and section 11 claims related to misinformation disseminated by complex ETFs and mutual funds. Our initial consultation is free of charge. 


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