The New Jersey Attorney General John Hoffman is suing a Credit Suisse Group AG (CS) for securities fraud. The state’s regulator contends that the bank misrepresented the risks on over $10B in home loan-backed securities.
According to the mortgage-backed securities lawsuit, Credit Suisse is accused of failing to disclose that loan originators it employed had records of delinquencies and defaults and that some had even been suspended from working with the bank. The state’s attorney general claims that even though Credit Suisse’s traders were unwilling to hold the securities on the books of the bank, the latter was selling them to customers. Also, alleges the complaint, the despite receiving tens of millions of dollars in reimbursement from loan originators for the faulty loans, Credit Suisse did not give the money to the trusts that owned the loans.
A representative for Credit Suisse says the mortgage securities case is meritless. The bank is facing a similar lawsuit filed against it by New York’s attorney general.
Also investigating the financial institution over mortgage securities is the US Justice Department. Reuters reports that a source says that Credit Suisse is under scrutiny over its mortgage lending practices and whether it ignored warning signs related to how it signs off on loans so it could increase their output and they could be bundled into the securities.
Meantime, reports Reuters, its sources are reporting that the US Justice Department is getting ready to file civil charges against Bank of America’s (BAC) Merrill Lynch (MER) and Citigroup Inc. (C) for selling faulty mortgage securities just before the financial crisis. Investors allegedly lost tens of billions of dollars after buying securities that Citigroup had promoted as safe even though it had reason to think otherwise. As for the probe involving Merrill, that is reportedly drawing to a close.
Members of the US banking industry have argued that they shouldn’t be the ones liable for marketing different mortgage securities that went on to fail. Still, the investigations, lawsuits and settlements keep coming.
Our securities fraud lawyers represent investors that have suffered losses due to the negligence, misconduct, and carelessness of industry members. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.
NJ sues Credit Suisse over sale of $10B in troubled mortgage-backed securities, Daily Journal/AP, December 18, 2013
U.S. preparing civil charges against Citigroup, Merrill Lynch: sources, Reuters, December 17, 2013
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