Barclays Capital and several of its affiliates settled fraud allegations from the U.S. for $2 billion March 29.
In a civil action filed in December 2016, the U.S. claimed Barclays caused billions of dollars in losses to investors who bought residential mortgage-backed securities between 2005 and 2007. The U.S. claims Barclays partook in a scheme to sell 36 subprime residential mortgage-backed securities and misled investors about the value of the mortgage loans backing the deals, according to a three-year investigation.
The U.S. alleged more than half of the loans backing the deals defaulted. "Barclays systematically and intentionally misrepresented key characteristics of the loans it included in these RMBS deals. In general, the borrowers whose loans backed these deals were significantly less creditworthy than Barclays represented, and these loans defaulted at exceptionally high rates early in the life of the deals," the Justice Department said.
In addition to the $2 billion settlement, the DOJ reached an agreement with two former Barclays executives named as defendants in the case. Paul Menefee, former head banker on subprime residential mortgage-backed securities at Barclays, and John Carroll, former Barclays head trader for subprime loan acquisitions, will pay a combined $2 million to dismiss claims against them.
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