JP Morgan accused of fraud

 

 New York's top prosecutor filed a civil complaint against JP Morgan Chase, alleging widespread fraud in the sale of mortgage-backed securities in the run-up to the financial crisis.

 

Eric Schneiderman, New York's attorney general, filed the civil lawsuit in New York state court yesterday.

The case is the first brought under the aegis of a law enforcement group that was formed by President Barack Obama in January to pursue alleged wrongdoing related to the financial crisis.

 

More cases from the group are expected to follow.

"We intend to follow up with similar actions against other sponsors and underwriters of RMBS," said an official in the attorney general's office.

The allegations relate to billions of dollars of subprime securities issued by Bear Stearns before the troubled firm, now owned by JP Morgan, collapsed in 2008.

he suit alleges that losses on residential-mortgage securities issued by Bear Stearns in 2006 and 2007 alone were "astounding," totaling $22.5bn, or more than a quarter of the original principal balance. The action asks that the company be made to pay an undisclosed amount of damages "caused, directly or indirectly, by the fraudulent and deceptive acts."

JP Morgan spokesman Joseph Evangelisti said the bank intends to contest the allegations, and that it is "disappointed" the New York Attorney General "decided to pursue its civil action without ever offering us an opportunity to rebut the claims."