US regulator National Credit Union Administration (NCUA) is suing UBS for violating federal and state laws through misrepresentations in the sale of mortgage-backed securities to two credit unions that later failed.
UBS is being sued for the alleged "misrepresentation" of residential mortgage-backed securities (RMBS), products that are largely to blame for causing the global credit crisis, when it sold it to US Central Federal Credit Union and Western Corporate Federal Credit Union in 2006 and 2007.
According to a complaint filed by NCUA, the two unions paid $1.1bn for the securities and at the time of purchase, US Central and WesCorp "were not aware of the untrue statements or omissions of material facts" in the offering documents of the RMBS.
The regulatory filing adds that the "misrepresentations" in the offering documents led the two unions to believe that the risk of loss was "minimal", when in fact, it resulted in substantial losses.
The case against UBS is the latest in a long line of similar lawsuits by NCUA against banks including RBS, Goldman Sachs, JP Morgan and Wachovia, now a unit of Wells Fargo. The regulator has, so far, settled claims worth more than $170m with HSBC, Citigroup and Deutsche Bank.
UBS declined to comment.
UBS faces a number of litigation issues as, like a number of other US, UK and European banks, it is currently under investigation for its alleged role in the Libor fixing scandal. Reports claim a number of employees, including Jay Merchant from the US, have left the bank on Libor-related matters.
Meanwhile Swiss prosecutors have opened a criminal money laundering probe into UBS related to a complaint accusing it of links to the proceeds of alleged illegal logging in Malaysia.
The bank has already been fined by the US for helping wealthy clients dodge US taxes in 2009.
The suit is labelled National Credit Union Administration Board VS UBS, Case No. 12-cv-02591, and was filed in the US District Court in Kansas.