Deutsche Bank Securities Inc. has consented to pay $17.5 million to the state of Massachusetts to settle allegations by that it did not disclose conflicts of interest involving collateralized debt obligation-related activities leading up to the financial crisis. Secretary of the Commonwealth William Galvin also is accusing the firm of inadequately supervising employees that knew about the conflicts but did not disclose them. DBSI, a Deutsche Bank AG (DB) subsidiary, has agreed to cease and desist from violating state securities law in the future.
In particular, the subsidiary allegedly kept secret its relationship with Magnetar Capital LLC. Galvin claims that DBSI proposed, structured, and invested in a $1.6 billion CDO with the Illinois hedge fund, which was shorting some of the securities’ assets. In total, Deutsche Bank Securities and Magnetar are said to have invested in several CDOs worth approximately $10 million combined.
The state of Massachusetts’s case focused on Carina CDO Ltd., of which Magnetar was the sponsor that invested in the security’s equity and shorted the assets that were BBB-rated. Ratings agencies would go on to downgrade the collateralized debt obligation to junk. Galvin contends that it was Deutsche Bank’s job to tell investors what Magnetar was doing rather than keeping this information secret.
Collateralized Debt Obligation Fraud Cases
If you suffered financial losses from investing in collateralized debt obligations that were touted to you as safe, liquid, and suitable for you, a conservative, risk-averse investor, please contact our CDO securities law firm to request your confidential, no obligation case assessment.
In re Deutsche Bank Securities Inc., Mass.Sec.Div., No. 2012-0020, 3/13/13 (PDF)
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Deutsche Bank Securities & National Financial Services Fined $925,000 for Regulation SHO Short Sale Restrictions & Supervisory Violations, Stockbroker Fraud Blog, May 22, 2010
Barclays LIBOR Manipulation Scam Places Citigroup, Credit Suisse, Deutsche Bank, JP Morgan Chase, and UBS Under The Investigation Microscope, Institutional Investor Securities Blog, July 16, 2012
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