Wells Fargo sues JPMorgan Chase over $481M loan fraud allegations
Wells Fargo has filed a lawsuit against JPMorgan Chase, accusing the bank of negligence during due diligence in a $481 million commercial real estate loan. The case, Wells Fargo Bank NA as trustee v JPMorgan Chase Bank NA et al, is ongoing in the Southern District of New York.
The dispute centres around a 2019 loan made by JPMorgan to the Chetrit Group for the purchase of 43 multifamily properties across 10 U.S. states. Wells Fargo alleges that JPMorgan and Chetrit knew the seller had overstated the properties' historical net operating income by 25%. Despite this, JPMorgan went ahead with the loan, knowing it would be sold to unsuspecting investors.
The loan, based on this allegedly fraudulent metric, eventually led to default in 2022. Investors have since lost tens of millions of dollars, with the borrower still owing more than $285 million. Wells Fargo is now seeking for JPMorgan to either repurchase the loan or pay damages for breach of contract.
The case, Wells Fargo Bank NA as trustee v JPMorgan Chase Bank NA et al, is a stark reminder of the potential risks in commercial real estate lending. The outcome will likely have significant implications for both parties and the broader financial industry.
