A Credit Suisse Group AG unit wasn’t negligent when it advised a Saudi Arabian investor who lost $31 million on structured notes after failing to make a margin call, a London judge ruled.
Basma Al Sulaiman’s decision not to cover a $10 million margin call from Credit Suisse following the collapse of Lehman Brothers Holdings Inc. in 2008 was “irrational as to be incomprehensible,” Judge Jeremy Cooke said in his written ruling on the dispute handed down today.
The Saudi national was given about $40 million in a 2003 divorce settlement with Walid Al Juffali, a member of one of Saudi Arabia’s richest families, according to the ruling. Al Sulaiman invested some $28 million of her money into 23 structured notes from Credit Suisse Securities Europe Ltd. and Plurimi Capital LLP, almost all of which were leveraged by loans from the bank.
Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Notes backed by certain types of mortgage loans fell in value during the financial crisis.
The case “illustrates the lack of foundation for her complaints and the irrationality of her attempts to hold others liable for her own risk-taking, the market collapse of October 2008 and her own decision not to take the obvious course when presented with margin calls,” Cooke said in the ruling.
Al Sulaiman had said that, following publicity about her divorce from the Saudi Cement Co. executive, she was “beset by banks and others like vultures, all of whom wanted to aid her in investing her settlement monies,” according to Cooke’s ruling.
Paul Howcroft, a lawyer for Al Sulaiman, declined through a law firm spokeswoman to comment. Credit Suisse also declined to comment.