Former Trader Deutsche Bank sued by US Justice

The U.S. Justice Department on Monday charged Deutsche Bank’s former head of subprime mortgage trading with civil fraud in connection with conduct dating back to the 2007-2009 financial crisis.

According to an announcement from the Department of Justice, Paul Mangione, the former Deutsche Bank head of subprime trading, allegedly “engaged in a fraudulent scheme to misrepresent the characteristics of loans backing two residential mortgage-backed securities that Deutsche Bank sold to investors that resulted in hundreds of millions of dollars in losses.”

In its announcement, the DOJ stated that the lawsuit and the conduct Mangione allegedly engaged in are related to the DOJ’s $7.2 billion settlement with Deutsche Bank from earlier this year.

According to the DOJ, Deutsche Bank “knowingly made false and misleading representations to investors about the characteristics of the mortgage loans it securitized in RMBS worth billions of dollars issued by the bank” between 2006 and 2007.

And according to the new civil lawsuit filed against Mangione, he was the one who made many of those false and misleading statements about the quality of the subprime mortgages. A spokesman for Deutsche Bank declined to comment.

Deutsche Bank's $7.2 billion settlement — reflecting a $3.1 billion civil penalty and $4.1 billion in relief to distressed borrowers and underwater homeowners — marked the largest settlement against a single entity related to the meltdown in residential mortgage-backed securities. When the settlement was announced, then-Attorney General Loretta Lynch said the bank didn't merely mislead investors, but "contributed directly to an international financial crisis."