JPMorgan Chase seeks to dismiss part of a lawsuit it’s facing from Wells Fargo on the grounds that it was actually the victim in an underlying criminal conspiracy.

Wells Fargo sued JPMorgan in March, accusing the country’s biggest bank of failing to conduct due diligence on a $481 million commercial real estate loan it originated for its customer, Chetrit Group, in 2019. The loan was later sold to a JPMorgan affiliate and deposited into a commercial mortgage-backed securities trust, of which Wells was trustee.

But an executive of ROCO Real Estate, which was the seller of the 43 properties the loan intended to buy, pleaded guilty in 2023 to a conspiracy to falsify records that inflated financial figures in the deal.

Specifically, ROCO CEO Tyler Ross pleaded guilty to falsifying trailing 12-month operating statements, which provides a picture of a property’s financial performance over the preceding 12 months, “purportedly inflat[ing] the [net operating income] on those properties by approximately $10 million,” according to JPMorgan.

“Through this lawsuit, [Wells] seeks to hold JPMorgan liable for ROCO’s criminal conduct, even though JPMorgan was the victim of that crime, and knew nothing of ROCO’s fraudulent scheme at the time JPMorgan originated the Mortgage Loan,” JPMorgan wrote.

While most claims asserted in Wells’ complaint are against Chetrit and not JPMorgan, one count alleges that JPMorgan breached its representations and warranties under the Mortgage Loan Purchase and Sale Agreement and is therefore obligated to repurchase the $481 million loan because JPMorgan had “actual knowledge” of an “Event of Default” under the loan agreement.

JPMorgan’s knowledge, Wells alleged, was of the fraudulent nature of ROCO’s trailing 12-month operating statements.

“Plaintiff asserts that, because JPMorgan was allegedly aware of some inaccuracies in ROCO’s financials, JPMorgan must have also been aware that ROCO was engaged in a broad fraudulent scheme. But Plaintiff does not plead any facts to support that inference,” JPMorgan wrote, adding that the district judge in Ross’ criminal case concluded that JPMorgan’s knowledge of some inaccuracies in ROCO’s financials does not prove that it knew the extent of the fraud in the T12s.

Additionally, Wells’ claim for breach of the mortgage loan purchase agreement “fails as a matter of law because the Complaint does not plead any facts to show that the breach was ‘material.’ … Plaintiff does not plead any facts to explain how the falsified T12s impacted either the price paid for the Mortgage Loan or the risk of loss on that loan. Absent those crucial factual allegations, Plaintiff fails to plead materiality, and Count 1 should be dismissed,” JPMorgan wrote.

Neither JPMorgan nor Wells immediately responded to a request for comment.