JP Morgan and Royal Bank of Scotland are being sued for more than $800m by the US credit union regulator for allegedly misselling mortgage-backed securities.
The National Credit Union Administration claims both JP Morgan and RBS made “material misrepresentations” in the offering documents that made US corporate credit unions believe the risk was minimal.
It says the credit unions which invested in these mortgage-backed securities suffered “dramatic” declines in value, rendering them insolvent as a result.
The NCUA says additional law suits may follow.
The five credit unions that went into liquidation were U.S. Central, Western Corporate, Southwest Corporate, Members United Corporate, and Constitution Corporate.
NCUA board chairman Debbie Matz says: “NCUA has a responsibility to do everything in our power to seek maximum recoveries from those involved in the issuing, underwriting and sale of the faulty securities that resulted in the failures of five of the largest wholesale credit unions.
“NCUA’s legal actions are based on ongoing investigations of individuals and entities responsible for selling these securities to the failed institutions. By these actions we intend to hold responsible parties accountable.”