Several Wall Street banks and credit rating agencies areclaiming that the former Eastern Financial Florida Credit Unionknew the risks going in before investing in $100 million incollateralized debt obligations.

This is the latest update on a suit filed in February by the $3billion Space Coast Credit Union in Melbourne, Fla., againstMerrill 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 toinflate allegedly toxic bonds into investment-grade securitiesusing fraudulent credit ratings and that the investment banksdumped those inflated securities onto unsuspecting investors.

Space Coast acquired the financially troubled Eastern Financial in 2009 after it was placed inconservatorship by the NCUA and issued a cease and desist order forquestionable loan practices.

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