In a summary judgment order that could have repercussions on other lawsuits arising out of the financial crisis, Southern District Judge Jed Rakoff (See Profile) on April 3 largely dismissed a $774 million fraud suit against JPMorgan Chase by a French-Belgian bank. Rakoff ruled that Dexia S.A. doesn’t have standing to bring claims in over 60 of the 65 mortgage-backed securities at issue in the case. The ruling in Dexia SA v. Bear Stearns, 12-cv-04761, if it stands on appeal, may limit Dexia’s potential damages to $5.7 million.
Between January 2006 and August 2007, a Dexia subsidiary called FSA Asset Management (FSAM) invested $1.6 billion in 65 MBS certificates issued by JPMorgan and subsidiaries it purchased in the financial crisis, including Bear Stearns and Washington Mutual. Dexia brought suit in January 2012, alleging the defendants misrepresented the risk profile of the mortgages used to collateralize the MBS. Dexia alleged that, because of those misstatements, it overpaid for the MBS by $774 million.
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