Holders of Washington Mutual securities file bankruptcy lawsuit in effort to save investment

WaMu securities holders file complaint

DOVER, Del. — Investors holding $1 billion in Washington Mutual Inc. securities are suing to protect their investment from being transferred to J.P. Morgan Chase as part of Washington Mutual’s bankruptcy reorganization.

A complaint filed Tuesday in bankruptcy court centers on the purported exchange of $4 billion in securities into WMI preferred stock when its flagship bank was seized by federal regulators in 2008 and sold to J.P. Morgan for $1.9 billion.

Certain securities holders claim the exchange never took place, and that WMI had no authority to transfer the securities to its Washington Mutual Bank subsidiary, and thereby to J.P. Morgan.

The complaint also alleges that WMI secretly worked with federal regulators in making the transfer to the bank and lied about its financial health.