JPMorgan Chase & Co. has settled a $153.6 million lawsuit. The civil suit alleges that the company misled buyers of complex mortgage investments, right when the housing market was collapsing. This lawsuit is deemed as one of the most significant legal actions that targeted Wall Street and their role in the 2008 financial crises.
The settlement made with the Securities and Exchange Commission came along a year after Goldman Sachs & Co. settled charges like JP Morgan, although Sachs Co. paid out $550 million to their buyers. The settlement will pay back all of the investors who were harmed by Chase’s business deals. The SEC claimed that Edward Steffelin, the head of the investment firm that selected certain mortgage securities, was to blame for the derogatory mortgage investments. The settlement is less than 1 percent of the $17.4 billion the bank brought in last year.
The settlement is still even less than what the bank brings in on a weekly basis. The bank is charged with failure to disclose to investors that Magnetar Capital hedge fund was a major role in choosing the securities and stood to benefit if they defaulted. The deal consisted of Megnetar making a $600 million bet that the investments would fall through once the deal would close in May of 2007. JPMorgan then launched their global sales efforts to try and sell their customers mortgage securities. JPMorgan did successfully sell $150 million worth of securities to several financial institutions. The institutions lost most (if not all) of their investments in the scheme, but will be paid by the bank for their investments previously lost.
Source: Associated Press