In refusing to toss a multibillion-dollar fraud lawsuit against Credit Suisse AG last week, New York Supreme Court Judge Marcy Friedman didn’t just disappoint the bank and its lawyers at Cravath, Swaine & Moore. The judge also poured coal in the stockings of other defendants looking for vulnerabilities in New York’s 93-year-old Martin Act, the state’s fearsome tool for combating financial fraud.
In her Dec. 24 decision, Friedman allowed New York Attorney General Eric Schneiderman to press forward with claims that Credit Suisse knew about flaws in loans packaged into residential mortgage-backed securities (RMBS) and misrepresented the quality of those loans, causing about $11.2 billion in investor losses. Friedman shot down the Swiss bank’s argument that suit was brought too late, handing the state a win that could make it harder for others on Wall Street to dodge state-launched investor fraud cases in New York.
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