The Securities and Exchange Commission filed a civil lawsuit against Goldman Sachs for securities fraud on Friday, charging the bank with creating and selling mortgage-backed securities that were designed to fail.
According to the complaint, Goldman let John Paulson, a prominent hedge fund manager, select mortgage bonds that he wanted to bet against because they were most likely to lose value and packaged those bonds into the “Abacus” investments, which were sold to investors like pension funds. As those securities plunged in value, Goldman and the Paulson hedge fund made money on their negative bets, while the Goldman clients who bought the investments lost billions of dollars.
full text here http://www.sec.gov/news/press/2010/2010-59.htm
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