Dexia SA has filed a lawsuit yesterday against Deutsche Bank. The suit cited fraud in connection with more than $1 billion in RMBS it purchased.
The lawsuit was filed in the New York State Supreme Court in Manhattan, according to a Bloomberg report.
Dexia said it invested over $1 billion in Deutsche Bank RMBS in 32 offerings from 2005 to 2007.
In its complaint, Dexia claims that Deutsche Bank, played an “ubiquitous role” in the mortgage origination and securitization process while betting against the U.S. housing market as far back as 2005, according to the report.
By the end of 2007, the German bank amassed a $10 billion short position that paid off when the loans backing the securities failed, according to the complaint.
Dexia said a Deutsche Bank trader entered into trades “enabling Deutsche Bank to effectively ‘short’ the subprime mortgage market by betting against subprime RMBS such as those it created and sold to investors like Dexia,” according to the complaint.
