Hard on the heels of the 7.2 billion dollar settlement with the US Department of Justice regarding the selling of defective mortgage backed securities (MBS), Deutsche Bank has suffered a further setback. A New York court on Monday 23 January approved a lawsuit brought by several Deutsche Bank clients who bought MBS between 2004 and 2008. The class action claims that Deutsche Bank did not inform them of the risks related to MBS, despite the bank knowing the low liquidity of most borrowers of US mortgage loans. Two of the most well known plaintiffs are Blackrock and Pimco, both large shareholders of Deutsche Bank.
The plaintiffs in the case, including Blackrock and Pimco, bought securities worth 2.6 billion dollars. The suit claims that Deutsche Bank failed to carry out its duty as a trustee, and the plaintiffs therefore seek monetary compensation for financial losses arising out of the MBS deals. The lawsuit will be continued with a hearing on February 2.
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