JPMorgan Sued Over Alleged Bear Fraud
JPMorgan Chase has been sued for allegedly defrauding investors who lost more than $20bn on mortgage-backed securities written by Bear Stearns, part of a last push by US authorities to hit banks for their behaviour in the run-up to the financial crisis.
Threatening similar claims against other banks, the office of Eric Schneiderman, New York attorney general, said Bear Stearns, which JPMorgan acquired in 2008, had “committed multiple fraudulent and deceptive acts in promoting and selling” MBS.
The complaint follows the creation of a president’s working group into mortgage fraud, widely seen as an attempt to file big cases before the US elections in November.
In a 31-page complaint filed in the State of New York’s Supreme Court, the attorney-general accused Bear Stearns of having “systematically failed to evaluate the loans” that were packaged into mortgage-backed securities, leading to the inclusion of mortgages on which borrowers were likely to default, and later did, causing investor losses of more than $20bn. The suit seeks the handover of unspecified profits made on the MBS.
JPMorgan hit back against the complaint, saying it was “disappointed” that it had not been given the “opportunity to rebut the claims”, which it said were made “relying on recycled claims already made by private plaintiffs”. The bank said it would “contest these allegations”.