Updated to include BNY Mellon spokesperson's statement.

NEW YORK ( TheStreet)-- South Carolina has sued BNY Mellon ( BK), claiming the bank cost the state $200 million in bad investments tied to subprime mortgages.

State Treasurer Curtis Loftis said that the bank did not, "follow specific investment guidelines, choosing risky subprime mortgages among other contract violations," within a securities lending program that BNY Mellon ran for the state.

Loftis also claims that BNY Mellon invested the state's money in debt instruments, including notes tied to now defunct Lehman Brothers investment bank.

"Our contract called for investments limited to conservative, high quality instruments," Loftis said in the press release.

A BNY Mellon spokesperson gave this emailed statement: "We believe the lawsuit is without merit and we intend to defend ourselves vigorously."

--Written by Maria Woehr in New York.

To contact the writer of this article, click here: Maria Woehr.

To follow the writer on Twitter, go to http://twitter.com/newsgirlmw.

To submit a news tip, send an email to: tips@thestreet.com.

If you liked this article you might like

JPMorgan CEO Jamie Dimon's 'Embarrassment' Could Grow as Debt Debate Looms

Wells Fargo Board Took 'Strong Actions' to Improve Itself, Ex-SEC Chief Says

The Exact Level to Buy JPMorgan, Citigroup and Other Big Bank Stocks

14 Bank Stocks That Will Either Surge or Do Nothing