U.S. regional bank M&T has sued Deutsche Bank because of losses M&T suffered on CDOs sold to it by the German bank, according to the German website Der Spiegel. Deutsche Bank allegedly told M&T that the CDOs were “safe” and “nearly risk-free.” Later the derivatives plummeted with the mortgage meltdown. Now M&T wants Deutsche to pay $82 million for losses it suffered.
This is especially reminiscent of the lawsuit filed against UBS by the hedge fund Paramax. I also reported another lawsuit against RBC involving the auction rate securities market, which froze following the mortgage meltdown last year. The core of the suit is that RBC told investors that they were investing in safe, secure investments.
The Paramax and the M&T cases are interesting as you would think that a hedge fund and a large bank would be aware of the risks of investing. Nevertheless, expect many lawsuits of this ilk before we are done with this crisis.
Source
US-Geldinstitut verklagt Deutsche Bank, Der Spiegel, 17 Jun 2008
Update: New Sources
Posted 14:36 EDT
M&T sues Deutsche Bank and HBK, Irish Times, 17 Jun 2008
Deutsche Bank Sued Over CDOs, Housing Wire, 17 Jun 2008
M&T sues German bank, Buffalo News, 17 Jun 2008