The Resolution Law Group: NCUA Sues Morgan Stanley, JPMorgan, UBS, & Other Banks Over $2.7B in Allegedly Fraudulent RMBS Sales to Credit Unions

The National Credit Union Administration has filed residential mortgage-backed securities lawsuits against JPMorgan (JPM), Morgan Stanley (MS), UBS (UBS), Royal Bank of Scotland Group (RBS), Barclays (BARC), and Credit Suisse (CS) accusing the financial firms of selling $2.7 billion of these fraudulent securities to the credit unions. The Members United Corporate Federal Credit Union and Southwest Corporate Federal Credit Union paid over $416 million for the RMBS in the case against Morgan Stanley and $1.9 billion from the other defendants. One of the credit unions contends that Wachovia (WB), Goldman Sachs (GS), Ally Securities and Wells Fargo (WFC) also defrauded it.

According to the NCUA’s RMBS fraud lawsuits, the investment banks issued misrepresentations related to the underwriting and sale of the securities. Offering documents allegedly contained false statements or omitted facts that were material. The government regulator is accusing the originators of systematically ignoring underlying guidelines in offering documents, which made the mortgage-backed securities’ risks higher than what was presented.

The MBS fraud lawsuits make claims under state and federal securities laws. Whatever is recovered will go toward the Temporary Corporate Credit Union Stabilization Fund.

Already, NCUA has settled RMBS fraud lawsuits against Bank of America (BAC), Citibank (C), Deutsche Bank (DB), and HSBC for more than $335 million.

Contact The resolution Law Group. Our institutional investor fraud law firm to find out whether you have grounds for securities case. Your RMBS fraud case consultation is free.

Advertisements

The Resolution Law Group: JPMorgan Considers $11B Mortgage-Backed Securities Settlement

Now that US Attorney General Eric Holder has turned down JPMorgan Chase’s (JPM) offer to settle criminal and civil charges related a mortgage-backed securities probe, the financial firm is looking at a settlement of possibly $11 billion. The financial figure has gone up as talks have expanded to include additional cases with more regulators.

The MBS investigations are over residential mortgage-backed securities (RMBS) that JPMorgan, Washington Mutual (WAMUQ), and Bear Stearns (BSC) issued between 2005 and 2007. Authorities have been looking into whether JPMorgan, which the other two firms acquired during the financial crisis, misled investors of the quality of the mortgages that were backing the securities. A lot of these RMBS failed as housing prices dropped. JPMorgan says that Washington Mutual and Bear Stearns issued about 70% of these RMBS.

One possible settlement could include $4 billion in relief to consumers and a $7 billion penalty. However, according to sources familiar with the settlement talks, the two sides have not come close to agreeing on the figure and the amount could change.

JPMorgan wants any settlement to confirm that the investigations are done and there will be no additional liability related to the MBS. Aside from the expected fine, the US Justice Department may try to get JPMorgan to admit wrongdoing, which the latter might consent to so as to avoid criminal charges. However, sources say that even if a deal is reached, the issue of whether anyone should be criminally charged over the RMBS losses may not be resolved.

Also part of the settlement talks is the Federal Housing Finance Agency. FHFA wants JPMorgan to pay over $6 billion to settle claims accusing the investment bank of misleading Freddie Mac and Fannie Mae about the mortgages that they bought from the bank during the housing bubble. Meantime, NY Attorney General Eric Schneiderman, wants recovery from JPMorgan over securities that the latter bought, which were issued by Bear Stearns as that firm was failing. Schneiderman contends that investors lost $22 billion.

It was just last year that JPMorgan settled the US Securities and Exchange Commission’s MBS case for $296.6 million. However, the bank settled without denying or admitting wrongdoing.

Last week, JPMorgan settled for $920 million with regulators over the London “whale” trading investigations. That debacle cost the financial firm over $6 billion last year. JPMorgan also consented to pay $80 million for credit card practice-related claims to its sale of identity fraud protection to customers who never received these products.

The Resolution Law Group represents high net worth individuals and institutional investors in securities arbitration, mediation, and litigation. We are here to help our clients recoup their RMBS fraud losses.

The Resolution Law Group: SEC Lifts Ban on General Solicitation

Beginning today, September 23, the SEC’s ban on general solicitation is no longer in effect. Those raising funds for corporations can now publish equity offerings on websites for crowdfunding, as well as blog and tweet about them. The move comes in the wake of the Jumpstart Our Business Startups Act, which was passed last year.

That said, even with the lifting of the general solicitation ban, raising funds for companies will likely remain a difficult endeavor. Funds can only be raised from investors that are accredited, and now, the latter will have to show proof that they fulfill the wealth criteria for accreditation by having an income greater than $200K during the last two years or a net worth of $1M (the value one’s primary residence is not included.)

Would-be fundraisers will need to provide extensive disclosure of offerings not just to the Commission, but also to the public, and there will be tight restrictions and the risk of penalty of a yearlong fundraising ban for violations. Also, in order to avail of being able to engage in general solicitation, startups will have to file a Form D with the regulator at least 15 days prior to starting to solicit. An amended Form D will have to be turned in within 30 days after the termination of an offering.

Still, there are those in the crowdfunding industry that believe that allowing for general solicitation should open up opportunities not just for businesses and entrepreneurs, but also for over 8.7 million accredited investors. Some expected there to be an increase in parties registering as accredited investors.

If you feel you are the victim of Securities Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

The Resolution Law Group: JPMorgan to Pay $920M to Settle London Whale Debacle & $80M Over Credit-Card Practice Allegations

JPMorgan Chase (JPM) has agreed to pay a $920 million fine to resolve securities fraud investigations conducted by the Federal Reserve, the Securities and Exchange Commission, the Office of the Comptroller of the Currency, and the Financial Conduct Authority in London. The probes were related to the multibillion-dollar trading losses the bank is blamed for in last year’s London Whale debacle.

The regulators cited JPMorgan for “deficiencies” related to controls assessments, risk oversight, and internal financial reporting. The bank’s senior management is getting the brunt of the blame for purportedly not citing concerns about the losses to the board. However, no charges have been filed in this case against any executive.

Also, the SEC was able to extract an acknowledgement from JPMorgan that it was in violation of federal securities laws over this matter. This comes in the wake of the regulator’s decision to reverse its policy that previously let banks settle without having to deny or admit to having done anything wrong.

The admission could put JPMorgan at a disadvantage in any private securities lawsuits from investors who may have been hurt by the trading fiasco, during which complex derivatives were traded, including those amassed by one now former JPMorgan trader who became known as the London Whale. Traders are accused of betting on credit derivatives, which let them wager on certain companies’ perceived health. Authorities say that when positions started to sour, the trades were still valued in too optimistic light, with their worth purposely inflated by traders. JPMorgan would lose $600 billion in the debacle.

As part of this securities settlement, the bank will pay $200 million each to the SEC, the Federal Reserve, and the Financial Conduct Authority, and $300 million to the comptroller’s office.

The settlements, issued today, revealed even more details about the bank’s failures over the London Whale trades, including that trading loss were a result of accounting controls that were “woefully deficient” in the chief investment office, miscalculations on spreadsheets, the standard employed for traders’ valuations were “subjective,” and the group tasked with checking the estimated losses and profits of traders was comprised of just one person.

Meantime, JPMorgan has yet to reach a settlement with the Commodity Futures Trading Commission, which is trying to determine whether the bank’s trading manipulated the market for the derivatives. However, the agency’s staff is recommending that it file an enforcement action.

Also today, the Consumer Financial Protection Bureau and the comptroller’s office imposed fines against the bank over credit card practices. The financial firm consented to pay $80 million over allegations that it deceived customers with credit cards into purchasing products that were supposed to protect them from identity fraud. However, the regulators say that products, which were offered by JPMorgan Chase between ’05 and 6/ ’12, were never created.

Already, the bank has paid about $300 million to over 2 million customers over this matter. $60 million of the $80 million settlement will go to the comptroller’s office while the bureau will get the remaining $20 million. The comptroller’s office also took issue with how JPMorgan gets back debt from customers, such as depending on potentially inaccurate documentation to determine how much a customer is owed.

If you feel you are the victim of Securities Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

 

FINRA Arbitration Panel Orders Citigroup to Pay Senior Investor Couple $3.1M for Alleged Broker Fraud

Citigroup Inc. (C) now has to pay Dr. Nasirdin Madhany and Zeenat Madhany $3.1 million over claims that the financial firm failed to properly supervise a broker, which caused the couple to sustain over $1 million losses. The broker is accused of directing them to invest in real estate developments that later went sour.

In 2010, the couple filed a FINRA arbitration case alleging fraud, negligence, and other wrongdoings related to over $1 million in real estate investments they made between ’04-and ’07. The Madhanys, who are senior investors, were customers of then-Citigroup worker Scott Andrew King, who referred them to politician Lawton “Bud” Chiles III. The latter was looking for investors for a number of real estate projects. King, who allegedly had a conflict of interest (that he did not disclose) from buying two condominiums from Chiles at a discount, is said to have connected the couple and the politician without Citigroup’s knowledge.

The Madhanys invested in two real estate projects, which began to have problems in 2007 when the US housing market failed and that is when the couple lost their money. Also, they, along with other investors, had signed personal loan guarantee related to a $12 million loan on one of the projects. When the loan defaulted in 2009, Wachovia sued all of them. Last year, a court submitted a $10 million judgment against the investors, with each person possibly liable for the whole amount.

The FINRA arbitration panel’s ruling this week includes over $1 million for the couple’s real estate investment losses and $2.1 million for the couple’s portion of the $10 million judgment. Should the Madhanys have to pay the entire $10 million amount, Citigroup will have to pay them back.

Selling Away
The securities industry prohibits selling away, which is a practice involving advisors promoting investments privately without their firm’s knowledge. Brokerage firms can be held liable when a broker engages in “selling away.”

The Resolution Law Group securities lawyers represent investors that have lost their investments because of selling away, elder financial fraud, and other types of securities fraud. Contact The Resolution Law Group today and ask to speak with one of our FINRA arbitration lawyers.

The Resolution Law Group: Many Financial Fraud Victims Don’t See It Coming, Says Survey

According to people who took a survey a report called the Financial Fraud and Fraud Susceptibility in the United States, while most people have been targeted by financial scammers, nearly half of them don’t see it coming. Almost 24,000 adults in the 40 and over age group participated.

Among the survey results:

• Over 80% of respondents had been approached about taking part in what was potentially financial scam.

• 40% were unable to recognize the typical red flag signs of possible fraud.

• Over 40% found the idea of a 100% yearly investment return very attractive.

• 43% liked the idea of investments that were “fully guaranteed.”

• 11% of respondents admitted to losing money when investing in specifics scams, such as e-mail schemes or sales pitches during free lunches, but only 4% admitted to being victimized by financial fraud when they were directly asked about it.

• Just 45% of those that admitted to being a fraud victim told anyone else about it.

• The most common reasons cited for not reporting what happened were a) not knowing who to tell and b) not thinking that telling anyone would help.

• Educated, younger males with high incomes were the ones most likely to risk big in order to possibly achieve high returns.

If you feel you are the victim of FINRA Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

 

The Resolution Law Group: JPMorgan Could Settle “London Whale” Fiasco for $800M

According to a source knowledgeable about negotiations, JPMorgan Chase & Co. (JPM) could pay at $800 million in penalties in the investigations conducted by regulators over the “London Whale” trading scandal. The regulators are the Federal Reserve, the Securities and Exchange Commission, the British Financial Conduct Authority, and the US Office of the Comptroller Currency. The announcement of the settlement is expected shortly.

The trading fiasco involved JPMorgan trading in complex derivatives, which were amassed by a trader who was dubbed the London Whale. The traders are accused of betting on credit derivatives, which let them wager on the supposed health of certain companies. Authorities contend that when the positions began to go bad, the traders valued them in a way that was too positive. The trades would cost the financial firm over $600 billion.

Following the debacle, the bank said that it made changes to internal controls. JPMorgan maintains that it was the one that detected the traders’ questionable activities and notified the authorities.

According to those in the know, as part of the settlement with regulators, the financial firm will admit it should have detected the problem sooner and that its lax controls let traders in their London unit construct the risky position and conceal the losses. The admissions come in the wake of the SEC’s recent reversal of its longtime policy that used to let all banks settle without denying or admitting to wrongdoing.

Also, JPMorgan has yet to resolve matters with the Commodity Futures Trading Commission, which is the regulator that oversees the market where the London Whale losses happened. The agency has been looking at whether the firm amassed a position so huge that it was able to manipulate the market for derivatives and it reportedly plans to impose its own penalty later this year.

This week, a formal indictment was announced against two ex-JPMorgan employees. Prosecutors filed criminal charges against, trader Julien Grout and manager Javier Martin-Artajo last month for allegedly concealing losses from the trades by overstating their positions’ value in the purported hopes that hundreds of millions of dollars in losses would go undetected. They are charged with falsifying bank records, wire fraud, and contributing to regulatory filings that were false.

However, both men are still in Europe and extraditing them could be difficult if not impossible. A third trader, Bruno Kisi, has not been charged. He is the one that was dubbed the London Whale because his wagers were so big. However, Iksil and authorities in New York arrived at a nonprosecution deal which involves him cooperating against Grout and Martin-Artajo.

Meantime, the Federal Bureau of Investigation and federal prosecutors are still looking into the bank’s losses in the London Whale fiasco.

If you feel you are the victim of Bank Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.