Citigroup Inc has sued a Connecticut firm founded by two former Goldman Sachs partners for $25 million over losses incurred during the unexpected surge in the Swiss franc in January.
The lawsuit, filed in Manhattan federal court on Friday, accused Tormar Associates LLC of breach of contract for failing to pay the amount of collateral it allegedly owed following a significant loss betting the wrong way on the Swiss franc.
Ron Marks, a co-founder of Tormar Associates, in a statement issued on Wednesday called Citigroup's claims "inaccurate." He accused the bank itself of breaching contracts and of seeking to hold Tormar to blame for "self-inflicted" losses.
"Had Citibank taken an appropriate approach, as required by our agreements, and worked with us, neither Citibank nor Tormar would have suffered any losses, as the positions quickly and inevitably rebounded in value," he said.
Danielle Romero-Apsilos, a Citigroup spokeswoman, said the bank stood by its complaint and called any suggestion it acted inappropriately "baseless."
The case came amid continued fallout from the January decision by the Swiss central bank to change its policy and allow the franc to trade freely against the euro.
The franc soared as much as 38 percent against the dollar following that unexpected move, hurting brokers and clients that were positioned incorrectly.
Currency broker FXCM Inc took a $300 million rescue loan from Leucadia National Corp to keep operating, and hedge fund firm Everest Capital shuttered its largest fund after major Swiss franc losses.
Based in Stamford, Connecticut, Tormar Associates is the joint family office of Marks and partner John Tormondsen, both of whom previously worked at Goldman Sachs before joining hedge funds and later founding the firm in 2003.
In its complaint, Citigroup said that on Jan. 15, when the Swiss central bank made its announcement, Tormar had been betting the Swiss franc would fall against other currencies.
Citigroup said the franc's surge triggered an obligation by Tormar to post $29 million in additional capital, which it said it could not do.
Tormar instead unwound its position, owing ultimately $35 million, minus $10 million in collateral it previously posted, Citigroup said.
The case is Citibank, N.A., v. Tormar, U.S. District Court, Southern District of New York, 15-01932.
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