A US judge has denied an attempt by big Wall Street investment banks to dismiss a massive class-action lawsuit filed against them by investors alleging securities fraud, setting the stage for a settlement that could cost them billions of dollars.

Federal Judge Shira Scheindlin said yesterday that the plaintiffs' lawyers had presented evidence of a "coherent scheme" by investment banks to defraud investors with the hot initial public offerings (IPOs) they underwrote for scores of technology companies during the bull market.

The decision means that plaintiffs' lawyers will have access to bank documents, emails and memoranda they have requested as possible evidence, and may also interview bank executives as part of their pre-trial discovery.

This threat is expected to ratchet up pressure on the banks to pay a settlement, which many experts have predicted at more than $5 billion (€4.6 billion), the largest in a securities fraud class-action lawsuit.

The plaintiffs have accused 55 banks and 309 firms of using bogus stock research and other techniques to pump up IPO prices.