Credit Suisse Group AG (CSGN) was sued by New Jersey over claims the bank misrepresented the risk to investors in more than $10 billion in residential mortgage-backed securities.

The state claims Credit Suisse Securities (USA) LLC and two affiliates misled investors about defects in securities issued in 2006 and 2007. The bank didn't disclose that loans failed to meet underwriting standards and originators had "poor track records characterized by alarming levels of defaults and delinquencies," New Jersey claimed.

Such red flags showed the securities "posed a high risk of delinquency and default, which could — and ultimately did — inflict enormous losses on the investors," according to the complaint, filed in state court in Trenton. Acting Attorney General John J. Hoffman announced the case today.

Credit Suisse, the second-biggest Swiss bank, faces a similar lawsuit from New York Attorney General Eric Schneiderman, who claimed last year that the bank misled investors about its review of mortgages underlying securities. The Zurich-based bank has asked a judge to dismiss the case.

"This complaint is without merit," Drew Benson, a Credit Suisse spokesman, said in an e-mail. "It recycles baseless claims and uses inaccurate and exaggerated figures. We look forward to presenting our defense in court."

'Rampant Abandonment'

The securities were based on pools of mortgages not backed by Fannie Mae or Freddie Mac. Credit Suisse bought those loans from originators that failed to conduct proper due diligence, according to the complaint. Investors received prospectuses that failed to disclose "rampant abandonment of underwriting guidelines," according to the complaint.

Credit Suisse maintained a "Watch List Committee" to weed out risky originators, yet still bought their loans, according to Hoffman's complaint. The bank made "tens of millions of dollars in reimbursements" tied to defective loans, Hoffman said in a statement.

The bank's conduct "helped put the nation in financial crisis, with loan originators and investment banking firms abandoning prudent lending guidelines in order to generate quick profits," Hoffman said in the statement.

New York's attorney general praised Hoffman's action.

"I hope and believe that this lawsuit is a sign of tougher action ahead against those who caused the Great Recession," Schneiderman said in a statement.

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