Barclays Settles DOJ’s Mortgage-Backed Securities Fraud Case for $2B

Barclays Capital Inc. (BARC) and a number of its affiliates will pay $2B to settle the United States government’s civil case alleging fraud involving the underwriting and issuance of residential mortgage-backed securities. The settlement comes after a three-year probe. The case is US v. Barclays Capital Inc.

The US accused Barclays of taking part in a fraud to sell three dozen residential mortgage-backed securities deals, causing investors to suffer billions of losses. More than $31B of Alt-A and subprime mortgage loans were securitized and over half of these went on to default. The RMBSs were sold leading up to the 2007 financial crisis.

The bank and its affiliates allegedly misled investors about the quality of the loans backing the RMBS deals, including purposely misrepresenting key features of the loans that involved. The British bank, meantime, maintains that it did not mislead investors about the quality of the loans. The government, however, contends that Barclays committed wire fraud, mail fraud, bank fraud, and violated the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

Meantime, the US government also arrived at settlements with two ex-Barclays executives who were defendants in the lawsuit and were involved in the RMBS deals. Former Barclays subprime loan acquisitions head trader John Carroll and ex-Barclays subprime RMBS securitizations head banker Paul K. Menefee will collectively pay $2M in civil penalties. Both men maintain that they too did nothing wrong.

The US Department of Justice’s lawsuit against Barclays was filed in 2016 after the bank rejected a penalty proposed in earlier settlement negotiations.

Other RMBS fraud cases settled by the DOJ include a $5.3B deal with Credit Suisse (CS) and a $7.2B settlement with Deutsche Bank (DB). Royal Bank of Scotland (RBS) has yet to settle similar RMBS fraud allegations against it.

If you believe that you may have sustained investment losses due to residential mortgage-backed securities fraud, contact Shepherd Smith Edwards and Kantas, LTD LLP today to speak with one of our RMBS fraud attorneys. Your initial consultation is a free, no obligation session. Over the years, we have helped thousands of investors to get back their investments.

Barclays Agrees to Pay $2 Billion in Civil Penalties to Resolve Claims for Fraud in the Sale of Residential Mortgage-Backed Securities, Justice.Gov, March 29, 2018

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