MBIA Inc., the largest bond insurer, was sued by shareholders over claims that the company hid its potential losses from securities backed by mortgages.
The suit alleges that Chief Executive Gary C. Dunton and Chief Financial Officer Charles Edward Chaplin violated federal securities laws by issuing false financial statements, regulatory filings and statements during investor calls.
The company reported fourth-quarter write-downs and expenses this month of about $4 billion related to mortgage securities.
Shares of MBIA rose $2.48, or 17.6%, to $16.59. An MBIA spokesman didn't return a phone call seeking comment after business hours.