Federal and state officials said that companies responsible for the 2008 financial crisis will face more lawsuits. They made the statement a day after New York State filed a lawsuit against JPMorgan Chase & Co for fraud regarding mortgage-backed securities packaged and sold by Bear Stearns.
The civil lawsuit accused Bear Stearns of deceiving investors. The company was bought by JPMorgan via a government-assisted sale in early 2008. It was claimed that it deceived investors to believe that the quality of loans in the mortgage-backed securities had been evaluated even if they were not.
Bear ignored defects in the loans and kept the information from investors. This was according to the suit filed by New York Attorney General Eric Schneiderman. It was the first action to be made by a federal state working group that was created this year. New York wants JPMorgan to return profits made from the alleged fraud and pay damages.
Schneiderman and other federal authorities announced the case in a press conference in Washington. They said that more cases would be filed in the near future. They declined to give more information about the next lawsuits.
The officials said that JPMorgan was at fault even if the federal government encouraged and was involved in the purchase of Bear Stearns. Schneiderman said that it goes to show that no one is above the law.
The lawsuit is the latest problem for JPMorgan, which faces various investigations and investor pressure regarding its %5.8 billion trading loss from a failed hedging strategy from its London office. The bank said that it would contest the claims against them and said that the suit didn’t cover the bank’s activity before the crisis.
According to the statement released by JPMorgan, the suit was regarding Bear Stearns that it acquired over the course of a weekend at the request of the US Government. The lawsuit was about the historic conduct by that entity.