In the latest update in a suit filed by Space Coast Credit Union claiming that the sale of $100 million in collateralized debt obligations led to the collapse of Eastern Financial Florida Credit Union, the defendants said the cooperative knew how risky the derivatives were.
The $3 billion Space Coast Credit Union in Melbourne, Fla., recently filed suit against Merrill Lynch, Wachovia Capital, Barclays Capital, Lehman Brothers' former CEO Richard Fuld and major U.S. credit rating agencies, Standard & Poor's and Moody's, alleging that they conspired to inflate allegedly toxic bonds into investment grade securities using fraudulent credit ratings and that the investment banks dumped those inflated securities onto unsuspecting investors.
Space Coast acquired the financially troubled Eastern Financial in 2009 after it was placed in conservatorship by the NCUA and hit with a cease and desist order for questionable loan practices.
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