(Bloomberg) -- UBS Group AG sold tens of billions of dollars worth of residential mortgage-backed securities by “knowingly and repeatedly” making false and fraudulent statements to investors about the loans backing those trusts, the U.S. Justice Department said in a civil suit filed Thursday.

  • The suit relates to 40 of those RMBS securities which UBS “sponsored, issued, underwrote, managed or offered,” according to federal prosecutors in Brooklyn, New York.

Key Insights

  • UBS got ahead of the suit Wednesday, releasing a statement that it expected to be sued and will fight the case. “The DOJ’s claims are not supported by the facts or the law,” UBS said.
  • According to the U.S., UBS securitized more than $41 billion worth of mortgage loans in the deals which proved to be "catastrophic failures," according to the complaint.
  • It’s unusual for a big bank to fight a case by the Justice Department in court rather than negotiating a settlement, but it’s a gamble that paid off for Barclays Plc. In 2016, the British bank broke off settlement talks -- also over RMBS sales -- with the Justice Department, which was seeking a $5 billion fine. Federal prosecutors in Brooklyn sued, and the bank wound up settling in March for $2 billion, the amount it had told the DOJ originally it wouldn’t go beyond.

Get More

  • UBS Will Fight DOJ in One of Largest Outstanding Legal Cases
  • Barclays Wins Its DOJ Gamble With $2 Billion Mortgage Settlement

To contact the reporter on this story: Patricia Hurtado in Federal Court in Manhattan at pathurtado@bloomberg.net

To contact the editors responsible for this story: Heather Smith at hsmith26@bloomberg.net, Joe Schneider

©2018 Bloomberg L.P.

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