Investors holding around $5 billion of Credit Suisse's canceled debt have sued Swiss regulator Finma over its decision to write down $17 billion in bonds, according to an outline of their appeal seen by The Wall Street Journal.

The bondholders allege that in the total write-down, they were penalized unnecessarily, violating their property rights, according to the summary of the filing.

This is the first major lawsuit in the public domain over the Swiss regulator's decision to render roughly $17 billion worth of Credit Suisse Additional Tier 1 debt valueless during the $3.25 billion government-orchestrated deal last month.

Quinn Emanuel Urquhart & Sullivan, the law firm representing the bondholders, said Friday the lawsuit was the first step in a battle to seek compensation for clients harmed during the buyout by UBS.

"We are committed to rectifying this decision, which is not only in the interests of our clients but will also strengthen Switzerland's position as a key jurisdiction in the global financial system," Thomas Werlen, Quinn Emanuel's Swiss managing partner, told Reuters.

The case was filed against Finma on Tuesday in the Federal Administrative Court in St. Gallen.

Finma made the write-down while trying to bail out the beleaguered Credit Suisse, which saw a slump in share value and bonds signaling fears of a global financial crisis.

Typically, shares must be written down entirely before creditors come in for a bailout, according to the Journal.

But, in the Swiss bank takeover, Finma decided to write down the debt in the rescue contract since the Swiss government backstopped UBS's acquisition of Credit Suisse in March. Further, Swiss lawmakers gave Finma the emergency authority to write down the AT1 bonds on March 19 — the day UBS purchased its embattled rival.

However, Credit Suisse shareholders will receive more than $3 billion in UBS shares for their stock in the bank, the publication reported.

The complaint argues that Finma did not adhere to Articles 5 and 9 of the Swiss constitution to arrive at a decision “in good faith and in a non-arbitrary manner,” according to the Financial Times.

Quinn Emanuel plans to argue that since shareholders were compensated while bondholders were not, considerations were not done proportionally — a violation of Swiss law, the publication noted.

Finma said it has no further comments on the allegations because it has explained its decision.

Lawyers emphasize the government has withheld information, owing to official secrecy laws, including why the UBS buyout was the only possible option and what negotiations went on behind closed doors to persuade UBS to participate, according to the Financial Times.

Lawmakers created the class of AT1 bonds after the 2008 financial crisis. It is a type of bank capital that is kept to help financial institutions absorb losses in a downturn and can be converted into common equity or written off when required, depending on their terms, according to the Journal.

Signs of market reviving can be seen with Japan’s Sumitomo Mitsui Financial Group issuing $1 billion of AT1 bonds this week – the first major bank to issue this type of bond following the write-down of Credit Suisse’s bonds.

This is not the only lawsuit that Credit Suisse is embroiled in.

On March 16, investors sued Credit Suisse, alleging the bank overstated its financial outlook to shareholders before the Swiss lender’s shares crashed that week. Credit Suisse saw the biggest one-day selloff in its history the day before.

The lawsuit, filed in a federal court in New Jersey, came on the same day Credit Suisse borrowed $54 billion from the Swiss National Bank in an attempt to bolster its liquidity and restore investor confidence.