A federal appellate court just made it a tiny bit harder for buyers of collateralized debt obligations to sue for fraud, and the contracts professor in me is pleased. No, I’m not an inveterate cheerleader for rich corporate defendants; I simply think it’s vital to the legal system that we not twist principles into pretzels to make sure the bad guys suffer.
The case in question, Loreley Financing v. Wells Fargo Securities, was decided this month by the U.S. Court of Appeals for the Second Circuit. The dispute stems from the mortgage meltdown, the effects of which continue to ripple through the courts. In 2006 and 2007 — as we now know, exactly the wrong moment — the plaintiffs purchased CDOs from various subsidiaries of Wachovia, at the time the fourth-largest bank in the U.S. The court states with useful precision the rest of the drearily familiar story: “When the financial crisis hit in 2008, cash flow into the CDOs ceased and the CDOs became worthless.”
September 23, 2021 at 08:00PM
https://www.bloomberg.com/opinion/articles/2021-09-23/loreley-wells-fargo-cdo-case-fraud-should-be-hard-to-prove
Loreley-Wells Fargo CDO Case: Fraud Should Be Hard to Prove - Bloomberg
https://news.google.com/search?q=hard&hl=en-US&gl=US&ceid=US:en
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