Summary: As a result of allegations made against it for wrongs committed during the 2008 financial crisis, JPMorgan must pay $388 million in a court settlement.
According to Business Insider, JP Morgan Chase & Co has agreed to pay a $388 million settlement in a lawsuit that alleged the bank misled investors about the safety of $10 billion worth of mortgage-backed securities that were sold before the financial crash.
In 2013, the bank lost $380 million due to legal costs.
The lawsuit was brought by Forth Worth Employees’ Retirement Fund and other investors in offerings that were made before the financial crisis of 2008. They alleged that JPMorgan misled them about the appraisals, credit quality, and underwriting of the home loans that backed the certificates. The suit further alleged that after Lehman Brothers Holdings Inc. closed its doors, the certificates were worth a maximum of 62 cents on the dollar.
The bank agreed to a $13 billion settlement in 2013 in a case with the Justice Department. According to the Franchise Herald, the settlement was the largest in history. In those claims, it was alleged that the bank misled investors in mortgage-backed securities about the risks and soundness of the investments that triggered the2008 financial crisis.
The bank also had to pay $1.7 billion to victims of the Madoff Ponzi scheme.
Throughout the case, JPMorgan argued that the poor performance of the certificates was not because of the quality of the loans, but because of the collapse of the economy as a whole.
JPMorgan added $1.5 billion to its litigation reserve in 2013.
The settlement, which was disclosed in a court filing Friday, now must be approved by a judge. According to Nasdaq, the litigation has been ongoing for six years.
Source: Business Insider
Photo credit: Bloomberg