Recently in Banking Fraud Category

March 13, 2014

JP Morgan Settles Suit Over Toxic Mortgage Backed Securities for $400 Million

US banking giant JPMorgan Chase has agreed to pay USD 400 million in a settlement for litigation filed by Syncora Guarantee Inc. over mortgage-backed securities.

Syncora said it would drop the rest of its cases against the banking giant as a result of the $400 million settlement

The securities sold to Syncora came from Bear Stearns, which JPMorgan acquired in 2008 amid the financial crisis. Syncora said JPMorgan misrepresented the quality of mortgage assets linked to the securities.

The Syncora deal comes on the heels of several major JPMorgan settlements, including a $13 billion deal with the Department of Justice in November 2013 that resolved a series of US and state lawsuits over the sale of toxic mortgage-backed securities.

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March 12, 2014

RBS reaches $275 million mortgage-backed securities settlement

On Feb. 19, RBS officials announced that the company had reached a $275 million settlement with the U.S. government to resolve allegations of misleading investors in mortgage-backed securities. The settlement is the third-largest settlement in the U.S. class action against banks packaged and sold mortgage securities.


This case was originally filed in 2008 by New Jersey Carpenters Health Fund and the Boilermaker Blacksmith Pension Trust. The suit accused RBS and others of violating U.S. securities law by packaging and selling an estimated $25.39 billion of securities in 14 separate offerings to linked to the Harborview Mortgage Loan Trusts. These mortgage loans did not meet underwriting guidelines, a fact the suit says RBS concealed. The loans later sank to junk status.

This settlement is just a drop in the bucket compared to the estimated losses suffered by investors. As more and more of these settlements take place it is important that investors take actions to protect their legal rights in these sorts of cases.

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March 4, 2014

U.S. Supreme Court Limits SLUSA; Allows State-Law Securities Class Actions to Proceed

On February 26, 2014, the Supreme Court decided Chadbourne & Parke LLP v. Troice, 571 U.S. ___ (2014), ruling by a 7-2 vote that the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") does not bar state-law securities class actions in which the plaintiffs allege that they purchased uncovered securities that the defendants misrepresented were backed by covered securities. The decision is the important in that the Court has held that a state-law suit pertaining to securities fraud is not precluded by SLUSA. This is signifigant because it suggests that there are some limits to the broad interpretation of SLUSA's preclusion provision that the Court has recognized in previous cases. Chadbourne should encourage more plaintiffs to pursue securities-fraud claims under state-law theories,the facts of a given case will still dictate what standard will be applied given this most recent ruling.

Chadbourne arose out of a multibillion dollar Ponzi scheme run by Allen Stanford and several of his companies. Stanford and his associates sold certificates of deposit issued by his bank and then used the money for their personal gain. Although these CDs were not covered securities under SLUSA, the defendants misrepresented that they were backed by highly marketable securities that were covered by the Act. After the plaintiffs learned of the fraud, they brought state-law class actions against alleged participants in Stanford's scheme.

The Chadbourne case shows that the hard standard that was created under SLUSA will not preclude all state-law claims and that some state-law suits pertaining to securities fraud will be permissible.

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July 9, 2012

AGENCIES ON BOTH SIDES OF THE ATLANTIC INVESTIGATE BANK SCANDALS

In the aftermath of the Barclays scandal, United States and British Lawmakers are cracking down on regulators that should have been more proactive and dedicated in preventing the years of illegal banking behaviors. The Dealbook.com article said that the Barclays $450 million settlement is but the first action from this broad and far-reaching investigation.

The article lists some of the many players in this cross-Atlantic investigation. They are including the House Financial Services Committee, the Senate Banking Committee, the Commodities Futures Trading Commission, the Justice Department and the New York Fed, to name a few of the American organizations. In the UK, the Parliamentary Committee as well as the Financial Services Authority of Britain are very active in the investigation.

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May 31, 2012

THE VOLCKER RULE AND RESTRICTING BANKS

The Volcker Rule restricts the ability of federally insured banks to trade for their own benefit, according to this article in the New York Times.

The article states that with the large losses by banks in the trading of financial securities, especially mortgage-backed assets, there has been a push for more federal regulations. The Volcker Rule is one of the regulations pushed by the Obama Administration after the credit crisis.

The measure's main purpose is to keep federally insured deposits of average banking customers out of risk. To do so, one major part of the bars banks from making proprietary trades. Those are when the bank uses their money to place bets on the market that are unrelated to serving their customers.  The rule would also bar banks from investing in hedge funds or in private equities.

The article states that the measure has been fiercely opposed by banks and large Wall Street firms.

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