Talk about chickens coming home to roost….
On Friday, Goldman Sachs – the most profitable Wall Street firm in history — was charged with fraud by the U.S. Securities and Exchange Commission in the structuring and marketing of a debt product tied to subprime mortgages.
The SEC complaint named Goldman VP Fabrice Touree as the principal architect of a synthetic collateralized debt obligation (CDO) – called ABACUS — that relied on the performance of subprime residential mortgage-backed securities, costing investors more than $1 billion. Touree has also been charged with fraud.
The SEC says that Goldman didn’t tell investors “vital information” about ABACUS, including that a major hedge fund – Paulson & Co. – was involved in choosing the securities that made up part of the portfolio, and had taken a short position against the CDO, betting its value would fall.
Read the text of the SEC’s complaint against Goldman Sachs here.