Home » US business news » UBS to pay $1.4 billion to settle 2008 fraud claims

UBS to pay $1.4 billion to settle 2008 fraud claims

By Hugh Fort in US business news, posted August 15, 2023

Swiss bank UBS has settled fraud allegations related to the 2008 financial crisis by agreeing to pay $1.4 billion.

This settlement concludes the final case initiated by US prosecutors who were investigating the actions of banks leading up to the 2008 financial meltdown.

The prosecutors accused UBS of providing misleading information about the quality of mortgages it packaged and sold to investors between 2006 and 2007.

UBS neither admitted nor denied these allegations.

But the firm confirmed in a statement that it had already allocated funds for this "legacy" issue.

This settlement will address all civil claims against UBS in the US.

UBS had attempted to get the case dismissed, arguing the prosecutors hadn't shown evidence of deliberate fraud.

The lawsuit, filed in 2018, claimed UBS had deceived investors when selling mortgage-backed securities over a decade ago.

Ryan K Buchanan, the US attorney for the Northern District of Georgia, said UBS's actions contributed to the financial crisis, which negatively impacted countless Americans.

He added this settlement should act as a cautionary tale for other financial institutions.

He also emphasized the severe consequences of misrepresenting crucial information to investors.

This undermines the trust in public markets.

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$36 billion has been paid out

UBS is the 18th financial institution to settle in the US concerning its role in the 2008 crisis.

Collectively, the settlements have resulted in penalties exceeding $36 billion, involving some of the world's largest banks and rating agencies.

Other major banks, such as JP Morgan and Bank of America, have agreed to pay even larger amounts than UBS.

The exposure of global banks to bad US mortgages in the early 2000s was a significant factor in triggering the financial crisis.

This crisis caused a considerable contraction in the global economy.

This led to the worst downturn since America's Great Depression in the 1930s.

The crisis also led to the collapse of major banks, including Lehman Brothers in 2008.

Prosecutors believe illegal mortgage lending by banks exacerbated the crisis, especially with the widespread trading of securities backed by these mortgages.

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