A U.S. federal judge denied UBS Group AG's request to dismiss a U.S. Department of Justice lawsuit accusing the Swiss lender of causing significant losses for investors who bought residential mortgage-backed securities sold before the 2008 financial crisis, Reuters reported.

According to the report, U.S. District Judge Margo Brodie said the Justice Department had sufficiently alleged that the bank intended to defraud investors or acted recklessly toward them from 2005 to 2007.

The investors purchased securities backed by more than $41 billion of subprime and other risky loans, many of which were made by now-defunct lenders, the report said.

The Department of Justice claims UBS securitized the loans despite being aware of the "severely deteriorating" underwriting standards at these now-defunct lenders, the newswire reported.