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Browse: Home / 2010 / April / 16 / SEC Charges Goldman Sachs, Vice President, With Misstating Key Facts on Subprime CDO

SEC Charges Goldman Sachs, Vice President, With Misstating Key Facts on Subprime CDO

By Securities Docket on April 16, 2010, 10:50 am

The SEC announced today that it has brought a case against Goldman, Sachs & Co. and one of its vice presidents, Fabrice Tourre, for allegedly “misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.”

The SEC alleges that Goldman Sachs created a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities. Goldman allegedly failed, however, to disclose to investors “the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.”

The SEC further alleges that hedge fund 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.

Read the SEC Press Release

Posted in SEC | Tagged CDOs, Subprime

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