(July 13, 2010) — Cambridge Place Investment Management is suing the word’s biggest banks in an effort to recoup a $1.2 billion loss tired to subprime mortgages.
In the lawsuit filed in Massachusetts state courts on July 9, the hedge fund claims the banks misled the firm about its investments in subprime securities. The Boston-based firm said it lost about 50% of its investment, alleging that the banks facilitated an “environment of improper lending practices.”
The lawsuit, which could encourage other investors, such as large pension funds, to bring similar lawsuits against the banking industry, represents one of the biggest cases of its kind to be filed so far in the US. The suit takes aim at Morgan Stanley, Goldman Sachs Group Inc. and about 13 other banks.
The lawsuit brought by Cambridge focuses on residential mortgage-backed securities (RMBS), or bonds backed by home loans that fueled the financial downturn of 2008. Cambridge invested $2.4 billion in the securities.
The investment firm blames subprime lenders responsible for assessing borrowers for withholding information and bending the truth, The Daily Telegraph reported. The suit also alleges that banks failed to conduct proper due diligence before packaging the loans into financial instruments.
Barclays, Credit Suisse Group, Deutsche Bank, HSBC, Merrill Lynch and UBS are among the other banks listed as defendants.
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