October 30, 2020 - An investor in shares of Wells Fargo & Company (NYSE: WFC) filed a lawsuit in the U.S. District Court for the Northern District of California over alleged violations of Federal Securities Laws by Wells Fargo & Company in connection with certain allegedly false and misleading statements made between October 13, 2017 and October 13, 2020.

Since 2009, Wells Fargo & Company has dramatically ramped up its commercial lending activities and has become a leading market participant in the securitization of commercial loans, originating and distributing as well as investing in billions of dollars’ worth of collateralized loan obligations (“CLOs”) and commercial mortgage backed securities (“CMBS”) backed by corporate debt.

On April 14, 2020, in connection with the release of its first quarter 2020 financial results, Wells Fargo & Company revealed it was taking a massive $4 billion provision expense to account for expected credit delinquencies.

On July 14, 2020, Wells Fargo & Company released its second quarter 2020 results, which disclosed that the Company had suffered a $2.4 billion loss during the quarter, or ($0.66) per share, and was taking a $9.5 billion provision expense to account for expected credit delinquencies.

Then, on October 14, 2020, Wells Fargo & Company released its third quarter 2020 results, with the Company announcing that it had recognized another provision expense of $769 million and that non-accrual loans had increased $2.5 billion, or 45%, to $8 billion during the quarter. Shares of Wells Fargo & Company (NYSE: WFC) declined from $54.75 per share in November 2019 to as low as $20.76 per share on October 29, 2020.

According to the complaint the plaintiff alleges on behalf of purchasers of Wells Fargo & Company (NYSE: WFC) common shares between October 13, 2017 and October 13, 2020, that the defendants violated Federal Securities Laws. More specifically, the plaintiff claims that between October 13, 2017 and October 13, 2020, the defendants reassured investors that Wells Fargo’s commercial credit portfolios were of exceptional credit quality and the product of robust, industry-leading underwriting and due diligence policies and procedures, that in truth, however, Wells Fargo fueled its rapid commercial loan growth by lending to businesses that posed a heightened risk of default, that Wells Fargo systematically concealed these credit risks by artificially inflating the incomes generated by borrowing businesses, relaxing or failing to follow applicable underwriting procedures, and circumventing applicable risk controls, and that Wells Fargo exacerbated the threat posed by its defective commercial debt by packaging the loans into CLOs and CMBS and widely distributing these securitized products throughout the financial system.