NEW YORK (Reuters) -Wells Fargo ( WFC ) sued JPMorgan Chase ( JPM ) on Monday to recover losses for investors in a $481 million commercial real estate loan that was allegedly based on a fraudulently inflated financial metric.

The lawsuit pits the fourth-largest U.S. bank against the largest, with Wells Fargo ( WFC ) accusing JPMorgan ( JPM ) of turning a blind eye during due diligence in pursuit of millions of dollars in fees. 

JPMorgan ( JPM ) made the loan to finance the 2019 purchase by the Chetrit Group, a private Manhattan real estate development firm, of 43 multifamily properties with 8,671 apartments in 10 U.S. states.

Wells Fargo ( WFC ), in its role as the investors' trustee, said JPMorgan ( JPM ) and Chetrit learned before the $522 million purchase closed that the seller overstated the properties' historical net operating income, a key commercial real estate metric, by 25%.

But according to the complaint in Manhattan federal court, JPMorgan ( JPM ) went ahead with the loan, knowing it would eventually be sold in pieces to unwitting investors.

The borrower defaulted in 2022 and still owes more than $285 million, while investors have lost tens of millions of dollars, Wells Fargo ( WFC ) said.

"JPM had an obligation to engage in due inquiry to determine the scope of the fraudulent reporting" after learning about the inflated metric, Wells Fargo ( WFC ) said.

"Instead, JPM plowed ahead as if nothing unusual had happened," Wells Fargo ( WFC ) added, "without even bothering to correct known errors in the numbers."

The defendants also include Meyer Chetrit, a Chetrit Group principal who provided a loan guaranty.

JPMorgan ( JPM ) and the Chetrit Group had no immediate comment.

Wells Fargo ( WFC ) wants New York-based JPMorgan ( JPM ) to repurchase the loan, less amounts the trust received from sales of underlying properties, or else pay damages for breach of contract.

Lawyers for San Francisco-based Wells Fargo ( WFC ) did not immediately respond to requests for additional comment.

The case is Wells Fargo Bank NA as trustee v JPMorgan Chase Bank NA et al, U.S. District Court, Southern District of New York, No. 25-01943.