Liquidators and creditors of Lehman Brothers have brought a lawsuit against Barclays alleging that it made an instant profit of billions when it bought the failed bank's assets in 2008.
It is said this was achieved through negotiating a "secret discount" of $5 billion from Lehman's book of securities, which was valued at $70 billion when it collapsed, reports the Guardian.
Lehman executives are said to have co-operated in providing the discount on the understanding that they would be offered jobs with Barclays once the deal went through.
It is also claimed that Barclays received a further $4 billion in cash that it was not entitled to when the takeover took place.
John Varley, chief executive of Barclays and Bob Diamond, the financial institution's president, will appear in court in New York this week, with an expectation that their defence of the deal will focus on a claim that Barclays was taking a large risk in buying Lehman Brothers at a point where the global financial crisis was at its most turbulent moment.
An insider close to the British bank said: "Barclays was paying a price for a very distressed asset that was valued differently from how it would otherwise be."
Others who have appeared in court so far have denied a deliberate agreement on a discount was reached.
Steven Berkenfeld, a former in-house lawyer with Lehman Brothers who now works for Barclays, said that "unimaginable chaos" at the time of the deal in the markets was the reason for the $5 billion loss.
Last December, lawyers for Barclays said the case was unfounded as it was public knowledge that the bank was paying under the odds for the Lehman Brothers' assets after it filed for bankruptcy.
By Asim Shah