JPMorgan Chase’s Bear Stearns Asset Management has won dismissal of a lawsuit by Bank of America Corp. over a collateralized debt obligation transaction that resulted in billions of dollars in losses.
Bloomberg News reports that U.S. District Judge Alison Nathan in Manhattan granted JPMorgan’s request for summary judgment, or a ruling before trial, and dismissed all of Bank of America’s claims, including an allegation the defendants breached their fiduciary duty and a fraud claim tied to the CDO deal.
Bank of America sued Bear Stearns Asset Management and hedge-fund managers Ralph Cioffi and Matt Tannin in 2008, saying it suffered billions of dollars in losses after they sought capital to prop up failing funds in 2007.
Mortgage-backed assets, mostly owned by the Bear Stearns hedge funds, were used to back the sale of securities in the deal structured by Bank of America, according to the complaint.
Hedge fund losses hidden from the bank led to the funds’ collapse and caused an “enormous decline” in the securities and the assets backing them, the bank alleged.
Nathan dismissed Bear Stearns’s counterclaim, saying the matter was moot. Cioffi and Tannin were acquitted after a 2009 federal trial of charges they misled investors in the funds.
A CDO is a type of security backed by a pool of securities that themselves are usually backed by other assets, often mortgages.
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