Articles Tagged with Aozora Bank

In New York, the Appellate Division, First Department, a state appellate court, is allowing Aozara Bank’s (AOZOF) mortgage-backed securities fraud lawsuit against JPMorgan & Chase (JPM) to proceed. The Japanese bank, which had brought MBS claims against a number banks, is alleging aiding and abetting fraud and fraud related to the banks’ creation, marketing, and/or sale of high risk securities.

Aozara had invested close to $560M by 2009 in at least 35 collateralized debt obligations that a number of banks had structured. It sued not just JPMorgan but also Barclays Bank (BARC), Deutsche Bank Securities Inc. (DB), Credit Suisse (CS), UBS AG (UBS), Goldman Sachs Group (GS), Credit Agricole, and Morgan Stanley (MS) in 2013.

In the collateralized debt obligation lawsuit against JPMorgan, the First Department reversed a ruling issued earlier by the Manhattan Supreme Court. The appellate panel has now found that the Japanese bank  had properly stated claims for breach of the duty of good faith and fair dealing and also fraud.  Aozora contends that JPMorgan, which is Bear Stearns successor, depicted certain CDOs as legitimate investments even as it used them to get rid of risky assets that were toxic. The appellate panel said that JPMorgan  has not demonstrated that its claims in offering documents gave Aozora proper notice that JPMorgan defendants had colluded to accept the toxic CDO assets from Bear Stearns’ balance sheets. The ruling said that Aozora’s lawsuit included enough facts to support its reasonable inference that fraud and scienter had occurred.

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