SEC charges Goldman Sachs with civil fraudApril 16th, 2010 - 10:01 pm ICT by BNO News
NEW YORK (BNO NEWS) — The U.S. Securities and Exchange Commission (SEC) on Friday charged Goldman, Sachs & Co. and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.
Goldman Sachs shares drop more than 10% after the SEC announcement.
Goldman Sachs structured and marketed a synthetic collateralized debt obligation that hinged on the performance of subprime residential mortgage-backed securities, SEC said.
“The product was new and complex but the deception and conflicts are old and simple,” said Robert Khuzami, Director of the Division of Enforcement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”
The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.
The marketing materials for the collateralized debt obligation is known as ABACUS 2007-AC1. The SEC alleges that Goldman Sachs Vice President Fabrice Tourre was principally responsible for ABACUS.
Investors in the liabilities of ABACUS lost more than $1 billion when deals collapsed in value.
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- Goldman Sachs' Fabrice Tourre Ardently Repudiates The Charges Of The SEC - Apr 28, 2010
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- Citigroup to pay $285 mn to settle fraud charges - Oct 20, 2011
- Goldman Sachs Gears Up For Fighting SEC Allegation - Apr 21, 2010
- Emails Demonstrate That Goldman CEO Extolled Profit From Subprime Shorts - Apr 26, 2010
- British watchdog to investigate Goldman Sachs - Apr 20, 2010
- Fabrice Tourre Testifies, Denies Charges - Apr 28, 2010
- US sues financial firms over mortgage losses - Sep 03, 2011
- Rajat Gupta, Rajaratnam had animosity: defence lawyer - Mar 03, 2012
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- US drops charges against Rajat Gupta - Aug 06, 2011
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