According to Bloomberg, the U.S. Supreme Court rescinded the bid filed by The Goldman Sachs Group Inc. (GS - Free Report) regarding the dismissal of a lawsuit, accusing it of selling risky debts via misleading statements. The plaintiffs are allowed to pursue the proceedings over their claims against Goldman pertaining to the offering of mortgage-backed securities, underwritten and issued by the bank.
The aforesaid lawsuit has been filed by the institutional investor, NECA-IBEW Health & Welfare Fund. The complaints claimed that Goldman deceptively sold the sub-prime mortgage-linked securities that gradually failed. Moreover, it misrepresented the value of instruments by providing materially misleading statements.
Notably, the fund alleged Goldman of committing forgery in 17 offerings of mortgage-backed certificates. The bank denied the accusations and commented that the fund invested in only two of the 17 offerings, and therefore legal claims can be demanded against those two offerings only.
However, in 2012, N.Y.-based Second U.S. Circuit Court of Appeals permitted NECA to file a lawsuit even against the remaining 15 offerings – in which the fund has not invested. Consequently, NECA came up with this lawsuit.
Among other major banks, Citigroup Inc. (C - Free Report) , JPMorgan Chase & Co. (JPM - Free Report) and Bank of America Corporation (BAC - Free Report) have also been legally accused for distorting documents related to mortgage-backed securities and other losses earlier.
The continuously increasing number of lawsuits is sure to dent banks’ reputation and financial conditions. However, investors, who have lost their hard-earned money in such investments, should feel relieved.
Goldman currently retains a Zacks Rank #3 (Hold).