According to Bloomberg, Sealink Funding Ltd., an Ireland-based investment firm, has filed a lawsuit against a number of major banks over residential mortgage-backed securities. The complaint lodged claims that these banks have misrepresented documents as the underwriters in the sale of mortgage-backed securities.
The accused banks are Wall Street bigs like Bank of America Corporation (BAC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), The Royal Bank of Scotland Group plc (RBS), Credit Suisse Group (CS), Deutsche Bank AG (DB) and Nomura Holdings Inc. (NMR).
Sealink alleged that these banks have issued misleading statements and omissions related to the mortgage-backed securities and has concealed risks associated with the securities. The company claims that the documents used in offering the securities contained untrue statements or omissions, about the actual risks involved in these investments. These misrepresentations of the risks provoked investments, which virtually have no value at current levels, and thus led to mortgage losses.
Sealink has filed the lawsuit in the New York State Supreme Court. The suit filed seeks $949 million in damages related to banks’ alleged false representations.
Sealink has also filed a number of other lawsuits over billions in residential mortgage-backed securities that it had purchased from Wall Street biggies. Other lawsuits include purchase of about $2.4 billion of residential mortgage-backed securities from JPMorgan and $1.6 billion from BofA during the period 2005 to 2007.
The Wall Street banks have been buckled under the weakness of the wider economy and the fundamental pressures on the banking sector. The increasing number of lawsuits could dent the financials of all these banks in 2012.
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