Bloomberg News reports that Allstate Corporation (ALL) has sued units of Citigroup Inc. (C) and Deutsche Bank AG (DB) over claims they fraudulently sold hundreds of millions of dollars of high-risk mortgage-backed securities.
According to Bberg, Allstate, which bought more than $200 million of the securities, backed by residential mortgages, from the Citigroup defendants and about $185 million from the Deutsche Bank units, is seeking to recover the lost market value of the securities, as well as principal and interest payments.
“Allstate was made to believe it was buying highly rated, safe securities,” the Northbrook, Illinois-based co. said in its complaint against New York-based Citigroup. “Defendants knew the pools were toxic mixes of loans extended to borrowers who could not afford the properties and thus were highly likely to default.”
Blomberg said both Citigroup and Deutsche Bank declined to immediately comment.
During Friday’s trading session, ALL shares have gained 13 cents, or 0.41% to $31.75. Citi is down $0.03, or 0.71% to $4.91 and DB has added $0.35, or 0.54% to $65.60.