The US credit union regulator has filed a lawsuit against the American arm of Credit Suisse Securities, accusing it of selling faulty or misrepresented mortgage-backed securities to three credit unions, which later collapsed. The suit was filed in a federal court in Kansas City, Kansas.
It was revealed in a statement by the National Credit Union Administration (NCUA) that the three credit unions bought over $715m of the faulty securities after allegedly being led to believe that there was little chance of losing money from the investment. The securities were sold to US Central Federal Credit Union, Western Corporate Federal Credit Union and Southwest Corporate Federal Credit Union, all of whom have since failed.
“Credit Suisse is one of several firms that sold faulty securities to corporate credit unions, which led to their collapse,” the agency said in a statement. The suite goes on to accuse Credit Suisse of underwriting and selling securities that were “significantly riskier than represented” to prospective buyers.
The NCUA has previously sued seven other investment banks and financial institutions in an attempt to recoup losses by credit unions across the US. Some previous defendants include JP Morgan Chase and JP Morgan Securities, The Royal Bank of Scotland Group and Goldman Sachs.