In a decision today, Judge Sullivan denied a motion from Freddie Mac executives to dismiss the SEC’s claims that they deliberately understated Freddie Mac’s exposure to subprime mortgages. Judge Sullivan wrote, “At its core, this case turns on a single question: when Freddie Mac and its executives used the term ‘subprime,’ what did reasonable investors understand them to mean by it?” The defendants’ motion (discussed in this prior post) had argued that the statements at issue were consistent with the particular, narrow definition of “subprime” intended at the time. Judge Sullivan determined that a broader understanding of “subprime” was plausible in context, and could have misled investors.