Barclays Capital, which was accused in a lawsuit filed by the U.S. government of taking part in a scheme that caused billions in losses to investors in residential mortgage-backed securities, has agreed to a $2 billion settlement in the case.

The British bank and two of its former executives—Paul Menefee, its lead banker for its subprime RMBS, and John Carroll, the bank's lead trader for subprime loan acquisitions—were accused of misleading investors from 2005 to 2007 about the quality of 36 RMBS that were propped up with more than $31 billion in subprime loans.

The government alleges the borrowers who took out the loans were less creditworthy than Barclays led investors and rating agencies to believe, and that more than half of the loans defaulted.

The government filed the lawsuit in December 2016 in the U.S. District Court for the Eastern District of New York, alleging violations of the Financial Institutions Reform, Recovery and Enforcement Act of 1989.

As part of the settlement agreement with the government, Menefee and Carroll agreed to pay a combined $2 million. The defendants did not admit any wrongdoing as part of the settlement.

In a news release, interim U.S. Attorney Richard Donoghue of the Eastern District of New York said the settlement reflects the government's commitment to hold banks “accountable for their fraudulent conduct.”

The substantial penalty Barclays and its executives have agreed to pay is an important step in recognizing the harm that was caused to the national economy and to investors in RMBS,” Donoghue said.

In a statement forwarded by a spokesman, Barry Berke and Dani James of Kramer Levin Naftalis & Frankel, who represented Menefee, said the government's suit was “baseless and should never have been brought.”

“Solely to put this matter behind him, Mr. Menefee has agreed to a settlement in which he has not admitted any wrongdoing,” the attorneys said.