Wells Fargo has filed a lawsuit against JPMorgan Chase to recover investor losses from a $481 million commercial real estate loan. The loan was allegedly based on false financial information, which Wells Fargo claims JPMorgan knew about but ignored during the loan process.
The loan was made in 2019 to finance the Chetrit Group’s purchase of 43 multifamily properties across 10 U.S. states. These properties included over 8,600 apartments.
Wells Fargo, acting as the trustee for investors, alleges that both JPMorgan and the Chetrit Group were aware that the seller had overstated the properties’ historical net operating income by 25%.
Despite this knowledge, JPMorgan proceeded with the loan, intending to sell it to investors.
The borrower defaulted on the loan in 2022, leaving over $285 million unpaid. Investors have lost tens of millions of dollars as a result. Wells Fargo argues that JPMorgan had a duty to investigate the false financial reporting but chose to move forward without addressing the discrepancies.
The lawsuit also names Meyer Chetrit, a principal of the Chetrit Group, who provided a loan guarantee. Neither JPMorgan nor the Chetrit Group has commented on the lawsuit.
Wells Fargo is seeking either for JPMorgan to repurchase the loan or pay damages for breach of contract. The case is currently in the U.S. District Court for the Southern District of New York.
Read more: