UBS to pay $1.43 billion in civil penalties for alleged fraud

UBS Group AG (NYSE: UBS) is in focus today after it agreed to pay civil penalties worth $1.43 billion to settle a long-standing case with the U.S. Department of Justice.  

UBS fined for alleged fraud

The said lawsuit alleged that UBS knew there were issues with RMBS (residential mortgage-backed securities) it sold to institutional buyers in 2006 and 2007 – but continued to sell them anyway.

Shares of the Swiss investment bank are still keeping in the green on Monday.

Note that DOJ has now recovered a total of $36 billion via settlements with as many as nineteen institutions for misconduct related to issuing RMBS that contributed to the Financial Crisis of 2008.

Among those nineteen was also Credit Suisse – a peer that UBS was made to buy in March of 2023.

UBS faces lawsuit over buyout of Credit Suisse

Also on Monday, Credit Suisse shareholders filed a lawsuit seeking compensation for losses related to forced merger of the now defunct Swiss bank and UBS.

UBS Group bought its rival this year for $3.42 billion – less than half of its market value at the time. The deal translated to one share of UBS for 22.48 shares of Credit Suisse.

But now shareholders of the acquiree are requesting a judicial review of those terms as they don’t find them fair. The news arrives only days after UBS voluntarily ended the $10.27 billion loss-protection agreement related to its buyout of Credit Suisse (find out more).

UBS is slated to report its second-quarter financial results on August 31^st. The bank stock is currently up 25% year-to-date.