On Wednesday, IKB Deutsche Industriebank AG (IKB), a German lender, filed a lawsuit against The Goldman Sachs Group Inc. (GS - Free Report) and Citigroup Inc. (C - Free Report) for misrepresentation of documents while selling securities. Moreover, UBS AG (UBS - Free Report) was also sued by Sealink Funding Ltd.
The lodged complaint accuses Goldman, Citi and UBS of presenting misleading documents related to the sale of over $73.2 million, $137.4 million and $158.1 million, respectively, in residential mortgage-backed securities.
Claimants alleged that these companies issued misleading statements with omissions related to the mortgage-backed securities and concealed risks associated with these securities. Both IKB and Sealink claim that the documents used for offering the securities contained fraudulent statements or omissions regarding the risks associated with the investments. Misinterpretation of these risks led to the investments, which incurred losses at current levels.
Both IKB and Sealink have filed the lawsuits in the New York State Supreme Court in Manhattan and demand compensation for the damages. However, Goldman, Citi and UBS have refrained from commenting on the issue.
Moreover, troubles for Goldman seem to be unending, as only recently it was sued by another German lender-Bayerische Landesbank in the Supreme Court over the same issue for $511.9 in securities.
The array of lawsuits has continued for the U.S. banks since the financial meltdown. Last month, another Wall Street Biggie - Morgan Stanley (MS - Free Report) along with Goldman was sued by HSH Nordbank AG, a German lender related for the sale of over $524 million and $110 million, respectively, in residential mortgage-backed securities.
Numerous lawsuits alleging banks of such wrongdoings are expected to tarnish their reputation and financials over time. However, the investors and other financial institutions bearing the brunt of these faulty practices are expected to be fairly compensated.
Shares of both Goldman and Citi currently retain a Zacks #3 Rank, which translates into a short-term Hold rating, while UBS retains a Zacks #4 Rank, which translates into a short-term Sell rating.