E-TRADE Financial Corporation may have misled investors about the true state of its financial condition and business prospects by failing to properly disclose the full nature of the risk profile of the assets held on its balance sheet.

This is a securities fraud class action lawsuit against E-TRADE Financial Corp. and certain of its officers and directors.

E-TRADE, through its subsidiaries, offers financial solutions to retail and institutional customers worldwide. In addition, E-TRADE offers mortgage, home equity, and margin and credit card products; real estate loans; and various consumer loans, including recreational vehicle, marine, commercial, automobile, and credit card loans.

The class action complaint alleges that E-TRADE issued materially false and misleading statements that misrepresented and failed to disclose:

(a) that E-TRADE was experiencing a rise in delinquency rates in its mortgage and home equity portfolios;

(b) that E-TRADE failed to timely record an impairment on its mortgage and home equity portfolios;

(c) that E-TRADE's securities portfolio, which includes assets backed by mortgages, was materially overvalued; and

(d) that based on the foregoing, E-Trade's' positive statements about E-TRADE's earnings and prospects were lacking in a reasonable basis at all times.

The class action complaint further alleges that on September 17, 2007, E*TRADE announced that it will exit the wholesale mortgage and it is revising its guidance for 2007, among other things. Upon this news, shares of E*TRADE's stock fell $2.32 per share, or over 15%, over the next six trading days as the investing public digested the news.