UBS to Shell Out $1.4B over Fraud Claims Related to 2008 Financial Crisis

<p>The Swiss
banking giant, UBS, has agreed to pay $1.44 billion in penalties to settle
fraud claims for misleading investors in the United States with residential mortgage-backed securities (RMBS), which it had sold in
the run-up to the 2008 financial crisis, the US Department of Justice (DOJ)
said today (Monday). </p><p>The law
enforcement agency in its complaint filed years ago had alleged that UBS
defrauded investors in connection with the sale of 40 RMBS issued in 2006 and
2007 by “knowingly” making false and misleading statements about the
characteristics of the loans underlying the securities. </p><p>“UBS was
allegedly aware of these significant problems because it had conducted
extensive due diligence on the underlying loans prior to the RMBS being issued
to determine whether the loans were consistent with representations that would
be made to investors,” the DOJ said in <a href="https://www.justice.gov/opa/pr/ubs-agrees-pay-1435-billion-fraud-sale-residential-mortgage-backed-securities" target="_blank" rel="follow">a statement</a>. “Ultimately, the 40 RMBS
sustained substantial losses.”</p><p>Furthermore, the agency noted that the settlement resolves the last case brought by its working
groups dedicated to investigating the activities of banks and other financial
actors during the crisis.</p><p>Previously,
the department reached settlement agreements over similar fraud claims it had made against
other major banks, including <a href="https://www.financemagnates.com/institutional-forex/regulation/nomura-fined-480-million-to-settle-decade-old-mortgage-charges/" target="_blank" rel="follow">Nomura Holdings</a>, <a href="https://www.financemagnates.com/institutional-forex/regulation/rbs-agrees-on-4-9-billion-settlement-over-us-mortgage-securities-charges/" target="_blank" rel="follow">the Royal Bank of
Scotland (RBS)</a>, <a href="https://www.financemagnates.com/institutional-forex/regulation/merrill-lynch-pay-back-10-million-securities-fraud/" target="_blank" rel="follow">Merrill Lynch</a> and <a href="https://www.financemagnates.com/institutional-forex/regulation/barclays-finalizes-mortgage-securities-probe-2-billion-settlement/" target="_blank" rel="follow">Barclays</a>. With the new settlement
reached with UBS, banks, loan originators and rating agencies that faced the DOJ's probe have now
paid over $36 billion in penalties, the justice department said.</p><p>However,
the agency pointed out that the claims resolved through the settlement with UBS are only
allegations, meaning that UBS did not make admit to any wrongdoings. In <a href="https://www.ubs.com/global/en/media/display-page-ndp/en-20230814-rmbs.html?caasID=CAAS-ActivityStream" target="_blank" rel="follow">a statement</a>, UBS confirmed the
settlement, noting that it has “fully provisioned” the
settlement in prior periods. </p><p>“The substantial
civil penalty in this case serves as a warning to other players in the
financial markets who seek to unlawfully profit through fraud that we will hold
them accountable no matter how long it takes,” Breon Peace, the US Attorney for
the Eastern District of New York, stated in the DOJ's statement,
speaking about the importance of the settlement. </p><p>“The over
$36 billion collected for conduct that fueled the 2008 financial crisis
reflects the Department of Justice’s deep commitment to protecting financial
markets, investors and the public against fraudulent conduct,” Peace added.</p>

This article was written by Solomon Oladipupo at www.financemagnates.com.