Australian sub-prime mortgage buyers are set for compensation pay-outs after a local court ruled Friday that failed U.S. investment bank Lehman Brothers sold them securities that lost most of their value in the global financial crisis.
Over 70 municipal councils, churches and charities sued local subsidiary Lehman Brothers Australia Ltd, which is now in liquidation, claiming they had been duped into buying sub-prime mortgage-related derivatives called collateralized debt obligations (CDOs).
They said they bought in the belief that CDOs were investment-grade securities and they were sure of getting their money back.
Wingecarribee Shire Council, south-west of Sydney, led a class action that could see CDO buyers elsewhere in the world take similar court action for compensation for sub-prime meltdown losses.
The court has yet to determine the level of compensation.
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