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Hey, Credit Suisse---Just Because You Disclose the Risks of Your Volatility ETN Doesn't Mean You Can't Be Sued

Investors were burned when the VelocityShares Daily Inverse VIX Futures Short Term exchange-traded note, a debt security, went down in flames following the Great Volatility Spike of Feb. 5. The death of this ETN was no mystery, unlike the volatility ETF that lived—the ProShares Short VIX Short-Term Futures ETF (SVXY)—whose escape was chronicled in Barron’s “Where Volatility Goes to Die." When the ETN fell about 90% following the market’s close that Monday, it triggered a poison-pill clause that would give Credit Suisse the right to call the note as outlined in the ETN’s prospectus. Rajan Chahal filed a class action lawsuit Wednesday in federal court in New York against Credit Suisse Group alleging the firm failed to disclose that it was manipulating the Inverse VIX Short ETNs to the detriment of investors.