Lehman Brothers Losses through UBS? UBS Faces Litigation for Selling Lehman Brothers Debt
UBS, the once-prestigious Swiss financial services company, has seen its reputation shattered since the credit crisis of 2008 on account of its many dubious and deceptive practices that significantly harmed its customers. Despite many expensive efforts by UBS to rebuild its image, the continuing revelations and resulting lawsuits have forced UBS to fight a constantly against investors seeking compensation.
Of all the sinister actions performed by UBS before the financial meltdown, the selling of Lehman Brothers debt to small investors may have been the most disturbing. These debt securities were marketed to investors as a safe investment that would guarantee their principal; however, this promise was quickly broken when Lehman Brothers was forced to declare bankruptcy in the late summer of 2008.
In actuality, these notes, which many small investors believed were essentially higher-yielding money-market funds, were simply bonds that were not backed by any sort of collateral. This provided investors, who were unknowingly accepting a large degree of risk, no protection at all when Lehman Brothers ran out of capital to fund its operations.
Indeed, Lehman Brothers had been using these notes as a source of funds as their cash position deteriorated, and UBS, as the main supplier of this debt, helped the defunct firm raise over one billion dollars from unsuspecting investors. Even more troubling, it appears that UBS continued to push these products even after analysts inside the company began to raise serious questions about the solvency of Lehman Brothers.
This is apparent from the high interest rates that UBS was charging Lehman Brothers for access to short-term funding. In addition, there are rumors suggesting that UBS actually advised its large institutional clients to avoid Lehman Brothers debt precisely because of their precarious financial situation.
Because of the Lehman Brothers debt fiasco, UBS has been the focus of several legal actions by defrauded investors who want their money back. UBS has already lost several arbitration cases initiated by individual investors, and there is a class-action lawsuit currently making its way through the court system. In addition, the Financial Industry Regulatory Authority fined UBS $2.5 million for its role in selling these worthless notes.
If recent trends are any indication, it is likely that UBS will continue to pay restitution to investors who were misled by deceptive sales practices and incomplete marketing information. Although no one knows what the final monetary cost will ultimately be, it is clear that this episode is yet another black mark for the company.
Lost money investing in Lehman Brothers through UBS? Did your UBS broker recommend bad investments?
If you lost money investing in Lehman Brothers through your UBS broker, you may be entitled to compensation. Our law firm is committed to helping investors that have lost money due to UBS get their money back. If you lost substantial money investing at UBS or through another advisor please complete the form on this page or call Attorney Bill Kyros at 1-800-934-2921 to discuss your rights.