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Credit Suisse, one of whose top bankers once said that one has “to go into the Russian psyche” to properly do business in the former Soviet Union, seems to have done so in a number of ways. One of them, however, is an apparently Putin-esque belief in mysticism. In this case, the demonstrably mythical ability to put the genie back into the bottle. As Russian troops began pounding Ukrainian cities with bombs and pouring over its borders, CS—which, more than any other bank, helped Russian oligarchs buy those lovely superyachts currently being impounded or sailing around in international waters seeking sanctions-safe harbor—sent a little request to those who bought securitized bonds backed by those loans to shred, burn, eat and otherwise erase or destroy any evidence that they’d ever happened.

Well, it seems this little housecleaning effort has gone about as well as its effort to suppress an unfavorable report about how badly the aforementioned banker screwed over a Georgian oligarch.

In a letter to Credit Suisse CEO Thomas Gottstein, US lawmakers asked the bank to turn over information and documents about a portfolio of loans backed by yachts and private jets owned by clients, potentially including sanctioned Russian individuals…. In particular, House Oversight Chair Carolyn Maloney and Rep. Stephen Lynch, chair of the Subcommittee on National Security, expressed alarm over Credit Suisse asking hedge funds and other investors to "destroy documents" related to yachts and private jets owned by the bank's clients.

Of course, the sanctions are a real pain in the ass for lots of banks, many of which would also like to pretend that bonds caught up in the conflict don’t exist, but lack Credit Suisse’s Dorothy-like faith that they can close their eyes, click their heels and wish hard enough to make it so.

Lawyers and compliance departments in western institutions must assess the risk of breaking sanctions as well as the risk of being sued by clients for forcing them in to defaults…. Big investment banks are holding up cash flowing out of Russia while they work out whether they can handle it, and in some cases have blocked interest payments altogether…. The snarl-ups are the consequence of the long chain of transactions involved in the global financial system, which in many cases is now being checked by lawyers at every link.

You’re telling EDL Capital….

[The] $693 million EDL Global Opportunities hedge fund had invested about a tenth of its assets in Russian equities by March 18, according to an investor letter seen by Bloomberg. The firm has decided to create two separate vehicles for some of these holdings and also make an in-kind redemption for VTB Bank PJSC and Alrosa PJSC shares, which are subject to asset freezing sanctions, another letter showed.

Credit Suisse faces US probe after telling investors to 'destroy documents' linked to oligarch yacht loans [CNN]
Banks stuck in legal tangle over Russian corporate bond payments [FT]
Hedge Fund EDL Separates Hard-to-Sell Russian Bets After Losses [Bloomberg]

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