Mr Goodwin, ex-RBS chairman Sir Tom McKillop, and other former directors are defendants in the case, as well as the bank.
“Whilst the merits of the case against the bank remain strong, the merits against the individual director defendants have always been more mixed,” the action group admitted in the letter.
The group disclosed that it had been holding out for a 92p a share offer but that the prohibitive costs of continuing with the case, the risk of losing, and support for the bank’s offer from one the key funders of the lawsuit, understood to be multimillionaire businessman Trevor Hemmings, made it untenable to continue.
It warned: “That means that there is currently no available funding to fund the legal and other costs to take the matter to trial.”
Even if funding could be found by the investors who want to continue with the trial, the action group warned that the burden of sharing the costs among a smaller group of claimants made the case too risky.
RBS declined to comment.