A federal judge has revived a closely watched lawsuit accusing JPMorgan Chase & Co of misleading Belgian-French bank Dexia SA into buying more than $1.6 billion of troubled mortgage debt.

Citing a recent federal appeals court decision, U.S. District Judge Jed Rakoff in Manhattan said he had lacked jurisdiction when he threw out much of the lawsuit on April 2. That ruling dismissed claims for all but $5.7 million of the roughly $774 million of damages that Dexia sought.

In his new ruling, the judge directed that the Dexia case be moved to the New York state court where it was originally filed.

Dexia and JPMorgan representatives did not immediately respond to requests for comment.

The lawsuit is one of many accusing banks of trying to boost profit by packaging low-quality mortgages into seemingly safe securities, while hiding the risks or failing to ensure that the loans were underwritten properly.

Dexia alleged it was fraudulently misled about the quality of 65 residential mortgage-backed securities certificates it bought from 51 offerings between 2005 and 2007 by JPMorgan, Bear Stearns Cos and Washington Mutual Inc. JPMorgan bought Bear and most of WaMu in 2008.

The case gained notoriety after emails and other materials were disclosed that suggested that the defendant banks had been selling RMBS they knew were toxic.

JPMorgan argued that all of the alleged misstatements in Dexia's complaint were located in a prospectus or prospectus supplement, and that there was no showing that alleged fraud caused any of the alleged losses.

The case is Dexia SA/NV et al v. Bear Stearns & Co et al, U.S. District Court, Southern District of New York, No. 12-04761.

(Reporting by Jonathan Stempel in New York. Editing by Andre Grenon)