Reuters reports that M&T Bank is suing Deutsche Bank in the New York state supreme court to recover $82 million it lost by investing in one of the bank's CDOs. According to the article, the Buffalo, New York-based regional bank, invested in a number of "Gemstone" notes in February 2007. The bank accuses Deutsche Bank of misrepresenting the investment as being safe.

According to other reports, M&T bought $42 million of tranches rated AAA by S&P of Gemstone VII and $40 million of a tranche of the same deal rated AA. Gemstone CDO VII, which closed in March 2007 and has suffered an event of default in April according to Moody's. The Gemstone series of CDOs, which are backed by asset-backed securities, are managed by HBK Investments.