The court-appointed trustee overseeing the liquidation of Thornburg Mortgage Inc. is suing some of Wall Street's biggest banks--including J.P. Morgan Chase & Co. (JPM), Citigroup Inc. (C) and Goldman Sachs Group Inc. (GS)--for $2.2 billion, alleging they engaged in series of "collusive" and "predatory" schemes that eventually drove Thornburg into bankruptcy.
The suits allege that the company was undone by a series of unlawful acts taken by investment banks during the mortgage crisis in 2007 and 2008.
In the largest suit, Sher sued subsidiaries of J.P. Morgan Chase, Citi, Credit Suisse, RBS and UBS for nearly $2 billion over what he calls "a collusive scheme" to take control of Thornburg and drive it into bankruptcy. That scheme involved the banks demanding more than $700 million of margin and interest payments for which, Sher says, the Thornburg estate received no reasonably equivalent value.
Bankruptcy law allows a trustee to unwind certain transfers, such as dividend payments, as fraudulent transactions if they rendered the company insolvent and provided no benefit to the estate.
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