Hedge fund sues banks for $1.2bn loss linked to subprime mortgages
A HEDGE fund is taking aim at the world’s biggest banks in an effort to recoup $1.2bn it lost on subprime mortgages, entering a legal fight where so far Wall Street has largely been unscathed.
The lawsuit by Cambridge Place Investment Management against Morgan Stanley, Goldman Sachs and about 10 other banks, is one of the biggest cases of its kind to be filed so far in US courts.
The case cites a sizable number of so-called “confidential witnesses” quoted in the lawsuit, who said underwriting standards were abandoned in order to meet demands for mortgages from Wall Street.
The case could encourage other investors, such as large pension funds, to bring similar lawsuits against Wall Street.
The lawsuit brought by Cambridge centres around residential mortgage-backed securities, which are bonds backed by home loans. Cambridge invested $2.4bn in the securities.
Goldman Sachs and Morgan Stanley declined to comment on the lawsuit. Two other defendants, JPMorgan Chase and Citigroup also declined to comment.