United States Sues UBS to Recover Civil Penalties for Fraud in the Sale of RMBS Securities

United States Sues UBS to Recover Civil Penalties for Fraud in the Sale of RMBS Securities


By Daniel Edstrom
DTC Systems, Inc.

November 8, 2018

Today the United States filed a civil complaint against UBS AG and several of its United States affiliates (together, “UBS”) in federal court for the Eastern District of New York.

The complaint alleges UBS defrauded investors contributing to the 2008 financial crisis, “which resulted in lasting economic harm to the nation and unnecessary suffering for Americans”.

The complaint alleges investors “suffered catastrophic losses”. Further, the complaint alleges “These practices resulted in massive losses to investors, harmed homeowners, and ultimately jeopardized the banking system.”

The complaint alleges that UBS’ fraudulent actions were based on “mail fraud, wire fraud, bank fraud, and other misconduct.”

As detailed in the complaint, UBS knowingly misrepresented key characteristics  of the loans, thereby concealing the fact that the loans were much riskier and much more likely to default than UBS represented.

While the complaint seems to allege that the UBS conduct “harmed homeowners”, it is apparent from the massive number of foreclosures that conduct alleged against UBS also resulted in catastrophic losses for homeowners.

Included in the tables filed with the complaint are many of the alleged false representations, including the following (not all inclusive):

False Representation That All Loans Complied With Underwriting Guidelines

False Representation That All Loans Applied With Applicable Law:

“The transferor will represent that as of the closing date, each loan is in compliance with applicable federal and state laws and regulations.” (S-25)
“All loans submitted for consideration are subject to review for compliance with UBS Home Finance guidelines, the applicable product matrix, as well as with local, state, and federal mortgage lending requirements.” (S-32)

So the allegation is that the underlying loans had no underwriting and did not comply with applicable laws even though UBS was putting forth representations to the public and/or investors that the loans were appropriately subject to underwriting standards and that the loans did comply with applicable laws.

Here is the link to the U.S. Attorney’s Office for the Eastern District of New York press release from November 8, 2018: U.S. Attorney’s Office for the Eastern District of New York Press Release

Here is the link to the U.S. Department of Justice press release from November 8, 2018: Department of Justice Press Release

Here is the complaint filed in the Eastern District of New York on November 8, 2018: U.S. v. UBS Securities LLC, et al

 

Author: dmedstrom

Reverse Engineering and Failure Analysis - Reverse Engineering Wall Street

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