Kirby McInerney | Structured Finance
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Structured Finance

Kirby McInerney is at the cutting edge of structured finance litigation, with over a decade of experience defending the interests of institutional and retail investors in cases involving the fraudulent structuring, marketing, and sale of asset-backed securities (“ABS”), including residential mortgage-backed securities (“RMBS”), collateralized debt obligations (“CDOs”), and other structured investment vehicles (“SIVs”). Indeed, in the wake of the financial crisis, KM attorneys were some of the first to recoup fraud-related CDO and SIV losses for investors from major Wall Street banks. These efforts often led, rather than followed, efforts by regulators and the U.S. government.

Although the financial crisis has ended, the practice of fraudulently misrepresenting and/or concealing the true nature and quality of structured finance products has not. To the contrary, fraud continues to permeate the industry, often involving the misrepresentation and omission of material information within the sole possession of the products’ structurers, not discoverable by even the most sophisticated of investors. KM provides the experience, knowledge, and dedication that our clients need to actively protect their financial risks.

Examples of KM’s experience in structured finance litigation:
 
  • Axonic Capital LLC, et al. v. Gateway One Lending & Finance, LLC, et al., No. 18-cv-05127 (C.D. Cal.).  Representation of institutional investors in a lawsuit involving ABS backed by automobile loans.  The case alleges that in marketing these ABS to Plaintiffs and other investors, defendants TCF Bank and Gateway fraudulently and materially understated the key metric that investors rely upon to evaluate and price auto-loan ABS, resulting in millions of dollars of investor losses. The court recently denied TCF Bank’s and Gateway’s motion to dismiss.  The litigation is ongoing.
 
  • CIMB Thai Bank PCL v. Morgan Stanley, et al., No. 653777/2012 (N.Y. Sup. Ct.).  Representation of CIMB Thai Bank PCL in a lawsuit relating to four fraudulent CDOs, the underlying collateral for which Morgan Stanley represented would be comprised of safe, high-quality assets selected by independent collateral managers.  The case alleged that Morgan Stanley controlled portfolio selection and chose high-risk collateral, while actively shorting the same collateral in order to enrich itself at Plaintiff’s expense.
 
  • Aozora Bank, Ltd. v. J.P. Morgan Securities LLC, et al., No. 652159/2013 (N.Y. Sup. Ct.).  Representation of Aozora Bank, Ltd. In a lawsuit involving a fraudulent CDO whose underlying collateral was represented by JPMorgan to be high-grade and selected by an independent collateral manager.  The case alleged that JPMorgan secretly usurped control over portfolio selection and filled the CDO with toxic assets that JPMorgan wished to remove from its own books.
 
  • In re Citigroup Inc Securities Litigation, No. 07-cv-09901 (S.D.N.Y.).  Lead counsel for individual investor lead plaintiffs in this securities fraud class action relating to Citigroup’s exposure to losses associated with its creation or sponsorship of numerous CDOs.  This case resulted in a settlement of $590 million for the class.  The settlement was, at the time, the largest CDO-related settlement ever, as well as the largest settlement of a fraud-only action.  A later filed SEC complaint concerning similar allegations settled for a small fraction of the class action settlement amount.
 
  • Dandong, et al. v. Pinnacle Performance Ltd., et al., No. 10-cv-08086 (S.D.N.Y.).  Lead counsel on behalf of retail investors pertaining to credit-linked notes (“CLNs”), which Morgan Stanley marketed to retail investors as a safe investment.  The case alleged that the CLNs were far from safe, and in fact, Morgan Stanley had engineered them to fail by investing in CDOs linked to risky companies, while simultaneously shorting those same assets and betting against their clients.  The case resulted in a settlement of $20 million.