Financial Firm News: Deutsche Bank Ordered to Face Part of Subprime Mortgage Fraud Lawsuit & Morgan Stanley & Bank of America Must Contend with MBS Case

A U. S. district court judge said that Deutsche Bank AG (DB) must face part of a mortgage fraud case accusing the German bank of bilking investors who purchased over $5.4M of preferred securities. The plaintiffs, led by two individuals and Belmont Holdings Corp., claim that Deutsche Bank hid its exposure to the subprime mortgage market.

Judge Doborah Batts turned down the bank’s bid to throw out claims related to about $2.55B of securities sold in 11/07 and 2/08. She did, however, dismiss claims involving $2.9B of securities sold in 5/07, 7/07, and 5/08. Investors claim that Deutsche Bank should have notified them in offering documents that it had significant exposure to subprime markets via collateralized debt obligations and residential mortgage-backed securities. They believe that early notification could have prevented them from purchasing the preferred securities before their values dropped, resulting in billions of dollars of losses.

Batts had originally dismissed the entire case in 2012 and her ruling was upheld by a federal appeals court in Massachusetts. However, last year, the U.S. Supreme Court ruled that issuers could be found liable when offering statements leave out material facts that are in conflict with what a “reasonable investor” might have extrapolated from the actual statement. An appeals court told Batts to look at the case again.

Now, she is saying that the investors plausibly alleged that Deutsche Bank was aware that it was incurring huge subprime losses but may have hidden this fact.

The SSEK Partners Group represents investors that have sustained losses due to mortgage fraud. Contact us today.

In other mortgage-backed securities news, a New York State Supreme Court Judge refused to throw out a MBS case brought against Morgan Stanley (MS) and Bank of America Corp. (BAC) over $32M in notes from a CDO that had bundled toxic MBSs. Judge Jeffrey Oing decided not to dismiss claim accusing the bank of misrepresenting both the the equality of assets in the $500M collateralized debt obligation issue and the risk of loss involving the notes that investors bought in 2007.

Deutsche Bank Subprime Case Pulled From Abyss
, Courthouse News Service, July 26, 2016

BofA, Morgan Stanley must face fraud lawsuit over mortgage securities, Reuters, August 2, 2016