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UBS sued by U.S. for fraud tied to mortgage-backed securities

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UBS Group sold tens of billions of dollars' worth of residential mortgage-backed securities by "knowingly and repeatedly" making false and fraudulent statements to investors about the loans backing those trusts, the U.S. Justice Department said in a civil suit filed Thursday.

The suit relates to 40 of those RMBS securities which UBS "sponsored, issued, underwrote, managed or offered," according to federal prosecutors in Brooklyn, NY.

UBS got ahead of the suit Wednesday, releasing a statement that it expected to be sued and will fight the case. "The DOJ's claims are not supported by the facts or the law," UBS said.

According to the U.S., UBS securitized more than $41 billion worth of mortgage loans in the deals which proved to be "catastrophic failures," according to the complaint. It's unusual for a big bank to fight a case by the Justice Department in court rather than negotiating a settlement, but it's a gamble that paid off for Barclays.

In 2016, the British bank broke off settlement talks — also over RMBS sales — with the Justice Department, which was seeking a $5 billion fine. Federal prosecutors in Brooklyn sued, and the bank wound up settling in March for $2 billion, the amount it had told the DOJ originally it wouldn't go beyond.

Bloomberg News
Enforcement Mortgage fraud RMBS UBS DoJ