Goldman Sachs fraud case announced, causes Wall Street stir - On Friday April 16, 2010 the SEC made the announcement that it would be filing a lawsuit against investment banking and securities firm, Goldman Sachs as well as VP Fabrice Tourre. The Goldman Sachs civil fraud suit arises from a mortgage package the company sold to investors, while knowing that a third party hedge fund company was betting against those mortgages. Pauls & Co., the hedge fund company involved, profited to the tune of at least a billion dollars and allegedly helped Goldman select bad mortgages to include as part of the package. The SEC is alleging that Goldman knowingly allowed investors to buy into the packages without disclosing the info about the third party’s involvement.
The particular product involved were mortgage-backed CDO’s (collateralized debt obligations) sold by Goldman Sachs from 2004-2008. A New York Times article in 2009 alleged that Goldman Sachs pressured Moody’s to rate the products higher than they should have been, and that many of the CDO’s Goldman sold performed very poorly. Goldman claimed it was hedging rather than expecting the CDO’s to fail. The one CDO in particular which brought about the SEC lawsuit is called Abacus 2007-AC1.
The Goldman Sachs stock tanked upon Wall Street investors getting a hold of the civil fraud suit news. The Goldman stock plummeted from $184.27 to $160.70 on April 16, 2010 after the news came out from the SEC. It was a loss of 13% which resulted in a loss of $10 billion in market value for the company.
Some outside business and legal professors believe the case may not have merit on the grounds that the investors who bought the product called “Abacus 2007-AAC1″, were savvy enough to make intelligent investment decisions. Others believe that Goldman was aware of Paulson’s involvment in the situation, yet downplayed it to their investors. Hearings will be held to receive testimony from key individuals in the Goldman Sachs banking organization.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
0 Responses
Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.