Judge Orders Deutsche to Face Subprime Mortgage Suit – DS News Kendall Baer

U.S. District Judge Deborah Batts rejected Deutsche Bank AG (DBKGn.DE)’s bid to dismiss claims with respect to roughly $2.55 billion of securities sold in November 2007 and February 2008, sayings the German bank must face part of a lawsuit claiming it deceived investors who bought more than $5.4 billion of preferred securities by concealing its exposure to the fast-deteriorating subprime mortgage market, according to a report from Reuters.

Judge Batts also dismissed the claims regarding $2.9 billion of securities sold in May 2007, July 2007 and May 2008. The lawsuit, led by Belmont Holdings Corp and two other individuals, is one of many suits seeking to hold banks responsible for hiding risks prior to the U.S. housing and financial crisis.

The report stated that investors believed Deutsche Bank should have warned them and could have stopped them from buying the bank’s preferred securities before their value diminished by nearly two-thirds, resulting in billions of dollars of losses.

This lawsuit had been dismissed by Batts in 2012, and the federal appeals court in Manhattan upheld that dismissal in 2014.

But the case gained new life in March 2015 when the U.S. Supreme Court stated issuers could be liable when an offering statement omits material facts that “conflict with what a reasonable investor would take from the statement itself.”

The appeals court instructed Batts to review the case again following the Supreme Court decision, says the report and in Monday’s 100-page decision, Batts said the plaintiffs plausibly alleged that Deutsche Bank knew but concealed that by the fall of 2007, it had accrued large subprime losses, but rejected claims to the May 2008 offering because the bank had by then improved its disclosures, according to the report

 

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