A Minnesota jury recently awarded more than $30 million to four plaintiffs in a securities fraud lawsuit against Wells Fargo. The lawsuit accused Wells Fargo of investing the plaintiffs’ money in risky securities and failing to disclose the diminishing value of the investors’ investments.
The plaintiffs alleged that Wells Fargo operated a securities lending program through which it held clients’ securities in custodial accounts and then used those funds to make temporary loans to brokers who then borrowed the securities to make risky trades, such as short sales and option trades involving structured investment vehicles, mortgage-backed and asset-backed securities. The complaint alleged that Wells Fargo had promised to focus on safe, liquid investments, such as money markets, as opposed to the risky investments that the brokers actually bought.
The jury found that Wells Fargo breached its fiduciary duty to the plaintiffs and violated the Minnesota Consumer Fraud Act and awarded compensatory damages of $30.1 million.
