"Try and act soon," the risk analyst told a colleague in the department dealing with investment fund Archegos, warning that the fund was vulnerable to liquidation, exposing Credit Suisse.
"If there is an issue, all brokers would be looking to exit simultaneously," he cautioned, a prediction that turned into reality less than two months later when the fund unravelled and lumbered Credit Suisse (CS) with a $5.5 billion loss.
The episode is one in a series of failures detailed in a report commissioned by the bank that offers an unprecedented glimpse into dysfunctional workings of one of the globe's largest banks to the wealthy.
The Swiss bank suffered by far the most of all peers from financing the fund's risky market bets, after its bankers won the upper hand over "junior" risk controllers, overriding safety limits and leverage controls, and leaving it unguarded when disaster struck.
The report is unusual because its publication represents a rare mea culpa from an institution that closely guards the secrets of its clients.
Its criticism is frank, blaming management failure, a focus on maximizing short-term profits and enabling of Archegos's "voracious risk-taking" for failing to steer the bank away from catastrophe.
Despite long-running discussions about Archegos, by far its largest hedge-fund client, Credit Suisse's top management were apparently unaware, with the group's chief risk officer and investment bank chief recalling hearing of it first on the eve of its collapse.
"There were numerous warning signals," the report said. "Yet the business ... failed to heed these signs."
The report examines the bank's relationship, spanning almost two decades, with Bill Hwang, the banker behind Archegos, and his chequered history. Hwang could not immediately be reached for comment.
It is part of a wider drive by new chairman Antonio Horta-Osorio to reform the culture of the bank, after a series of previous scandals from spying on executives to its entanglement with doomed supply chain finance specialist Greensill - a key associate of CS whose near coincidental failure represented a disastrous double whammy.
BANNED FROM TRADING
In 2012, Hwang settled insider trading allegations with the U.S. Securities and Exchange Commission and pleaded guilty to wire fraud with the U.S. Department of Justice, the report said. His fund, Tiger Asia, rebranded as Archegos.
Two years later, Hwang and Archegos were banned from trading in Hong Kong, the report noted. Credit Suisse did not cut its ties. Instead, it shifted its trading focus to the United States.
The report describes the bank's risk assessments following these episodes, as "perfunctory", while its bankers "shrugged off the settlements, guilty plea, and trading ban as isolated, one-time events".
In the years that followed, Archegos broke many of the safety limits and internal controls set by Credit Suisse. But rather than paring back its backing, bankers ramped up support.
Despite generating modest profit - the bank reaped $16 million in revenue in 2020 - Archegos went on to build up a portfolio with Credit Suisse totalling nearly $24 billion.
The 165-page report highlights deep-seated structural flaws, where a depleted risk department, with junior staff and outdated technology unable to challenge bankers driving the business.
It relays the damning assessment of another of the bank's analysts monitoring Archegos risks, who criticised the New York risk department.
"The team is run by a salesperson learning the role from people ... he did not trust to have a backbone," it said, without naming those involved.
Despite flashing red lights in the weeks ahead of its collapse, the bank reimbursed $2.4 billion of "excess margin" or surplus funds to Archegos, believing it was legally obliged to do so under its financing terms.
The crisis came to a head during the week of March 22, when Archegos's single largest bet - on ViacomCBS - dropped sharply, and another, Tencent Music Entertainment Group, plummeted 20%.
Archegos admitted to Credit Suisse that it had run short of liquidity. That evening, the bank's investment bank chief and group risk officer, both of whom have since left, were informed. Neither could be reached for comment.
"No one at CS ... appeared to fully appreciate the serious risks," the report said. "These risks were not hidden. They were in plain sight. When CS finally took steps ... the actions ... (were) too little, and too late."
(Reporting by John O'Donnell; Editing by David Holmes)
By John O'Donnell