April 24 (Reuters) - A new lawsuit by U.S. hedge fund

Appaloosa LP accuses the former Credit Suisse of misleading

investors about its health before $17 billion of its bonds were

written down to zero in a government-orchestrated rescue by

Swiss rival UBS.

In a complaint filed on Tuesday in the Newark, New Jersey

federal court, Appaloosa said two investors it advised suffered

significant losses when their Additional Tier 1 bonds were wiped

out in March 2023, just 1-1/2 weeks after they began purchases.

Appaloosa said Credit Suisse Chief Executive Ulrich Koerner

falsely proclaimed that liquidity was "very strong" and "getting

stronger" though the bank was suffering a deposit run, mirroring

a run that led to Silicon Valley Bank's collapse that month.

The lawsuit accuses Credit Suisse, Koerner and former

Chairman Axel Lehmann of "lying to the market about Credit

Suisse's deteriorating liquidity," and seeks unspecified damages

under U.S. securities laws and a New Jersey racketeering law.

UBS declined to comment.

A lawyer for Appaloosa and the investors, Azteca Partners

LLC and Palomino Master Ltd, did not immediately respond to a

request for comment. The plaintiffs are based in Short Hills,

New Jersey. Bloomberg reported the lawsuit on Tuesday.

Additional Tier 1 bonds, or AT1 bonds, are a capital cushion

that can support banks during market turmoil.

Though they rank above shares in banks' capital structures,

Switzerland's financial regulator FINMA had no obligation to pay

holders of Credit Suisse's AT1 bonds.

Its decision to seize the bonds while allowing UBS to buy

Credit Suisse for $3 billion shocked investors, and has prompted

many lawsuits in the United States and Europe.

UBS raised $3.5 billion in November in its first AT1 bond

sale since buying Credit Suisse.

The case is Palomino Master Ltd et al v Credit Suisse Group

AG et al, U.S. District Court, District of New Jersey, No.

24-05539.