Thousands of investors in Royal Bank of Scotland on Wednesday launched a potential £4 billion ($6 billion, 4.7-billion-euro) claim against the bank and its old bosses over a controversial 2008 shares sale conducted just before its state bailout.
The RBOS Shareholder Action Group -- comprising more than 12,000 private shareholders and over 100 institutional investors -- announced the legal action in a statement which argued that they had all lost money in a rights issue that misrepresented the bank's health.
Former top management -- including ex-chief executive Fred Goodwin and former chairman Tom McKillop -- are also being sued.
Royal Bank of Scotland declined to comment on the matter.
"The RBOS Shareholder Action Group today issued proceedings against Fred Goodwin, Tom McKillop, Johnny Cameron, and Guy Whittaker, all of whom were directors of the last, but not least, of the five defendants named; the Royal Bank of Scotland itself," the statement read.
"The Action Group maintains that the bank's directors sought to mislead shareholders by misrepresenting the underlying strength of the bank and omitting critical information from the 2008 rights issue prospectus.
"This means that RBS will be liable for the losses incurred on shares subscribed in the rights issue, by reason of breaches of Section 90 of the Financial Services and Markets Act 2000.
"It is estimated that the final claim may be as much as £4.0 billion," the statement added.RBS had launched a vast £12-billion rights issue in 2008 to shore up its balance sheet after its disastrous consortium takeover of Dutch bank ABN Amro at the top of the market.
However, just months later, RBS was part-nationalised by the British government with £45.5 billion of taxpayers' cash, making it the world's biggest banking bailout.
Britain still owns 81 percent of the Edinburgh-based lender after it was rescued at the height of the global financial crisis.
"Today represents a giant step forward for the many thousands of ordinary people who lost money as the result of inexcusable actions taken by banks and their directors in the financial crisis," said a spokesman for the Action Group.
"Now, for the first time, some of these directors will have to answer for their actions in a British court".
The claim is the second in recent days to be lodged against RBS after a group of 21 claimants launched a multi-million-pound lawsuit last week, also over its 2008 rights issue.