Sealink Funding Ltd., a fund created to manage the riskiest assets held by German financial institution Landesbank Sachsen AG, has filed a lawsuit in New York State Supreme Court against Morgan Stanley that accuses the bank of fraud related to more than $556 million in residential mortgage-backed securities (RMBS).
According to a Bloomberg report, Sealink purchased the securities between 2006 and 2007 based on Morgan Stanley information that claimed the loans backing the securities were properly underwritten and were deserving of their AAA credit agency ratings.
‘In truth, and as Sealink and the world would only later discover, the originators whose loans collateralized the Morgan Stanley RMBS at issue were among the worst of the worst culprits in the subprime lending industry,’ Sealink said in its lawsuit.
Sealink filed similar suits against Bank of America's Countrywide unit and JPMorgan Chase & Co. last fall. A Morgan Stanley spokesperson declined to comment on the lawsuit.