Two of the largest banks in the US are reportedly locked up in a legal battle on a loan of $ 481 million commercial real estate.
Wells Fargo suggests JPMorgan Chase, the biggest back in the US, about accusations that it has a real estate loan green light, although it reportedly knew that the financial statements were fraudulent, report Reuters.
In 2019, JPMorgan issued a loan to real estate development and investment firm Chetrit Group to finance the purchase of 43 Multi-Family buildings with 8,671 apartments in 10 states.
Wells Fargo acts as a trustee of the investors and claims that JPMorgan and Chetrit knew that the sellers fraudulently blown up the historical net income of the buildings by 25%, even before the deal was closed to $ 522 million.
The historic net income of a property is a financial statistics that measures the income generated by a building over a specific time frame. The income from the past of a property is usually used to assess its potential value.
Wells Fargo claims that JPMorgan has approved the overvalued real estate agreement to harvest millions of dollars in reimbursements, thinking that the assets would eventually be dumped on investors who would not realize that the buildings were not as profitable as on paper.
The loan from Chetrit became acid in 2022 and in the process, Wells Fargo says that investors have lost tens of millions of dollars in confidence.
‘[JPMorgan] Had the obligation to make the necessary inquiries to determine the scope of the fraudulent report. Instead of, [JPMorgan] First committed as if nothing had happened unusual without even having trouble correcting known errors in the figures. “
Wells Fargo asks the court to order JPMorgan to pay compensation or to buy back the loan and to make investors whole.
JPMorgan and Chetrit have not yet issued a statement with regard to the case.
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