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Message: Goldman Sachs in Trouble
Looking at the Goldman Sachs chart today, this should give everyone an indication why markets are off today. SEC is charging them with Fraud.
SEC charges Goldman Sachs with fraud
ReutersPublished: Friday, April 16, 2010
NEW YORK -- Goldman Sachs Group Inc was charged with fraud Friday bythe U.S. Securities and Exchange Commission in the structuring andmarketing of a debt product tied to subprime mortgages.
TheSEC alleged that Goldman structured and marketed a syntheticcollateralized debt obligation that hinged on the performance ofsubprime residential mortgage-backed securities, and which costinvestors more than US$1-billion.
It alleged that Goldmandid not tell investors "vital information" about the CDO, calledABACUS. This included that a major hedge fund, Paulson & Co, wasinvolved in choosing which securities would be part of the portfolio,and had taken a short position against the CDO in a bet its value wouldfall.
According to the SEC complaint, Paulson & Co paidGoldman US$15-million to structure the CDO, which closed on April 26,2007. Little more than nine months later, 99% of the portfolio had beendowngraded, the SEC said.
The SEC said Goldman VicePresident Fabrice Tourre was principally responsible for creatingABACUS. It also charged him with fraud.
Goldman, Paulson and Tourre were not immediately available for comment.
Shares of Goldman sank US$19.39, or 10.5%, to US$164.88 in morning trading on the New York Stock Exchange.
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