Monday, April 19, 2010

Goldman Sachs charged with fraud by SEC...

Goldman Sachs Group Inc was charged with fraud by the US Securities and Exchange Commission (SEC) over its marketing of a debt product tied to subprime mortgages that were designed to fail.

The lawsuit is the biggest crisis in years for Goldman, which emerged from the global financial crisis as Wall Street's most influential bank.

It is also a huge test for Chief Executive Lloyd Blankfein, who has faced a firestorm of criticism over the bank's pay and business practices. It comes as lawmakers in Washington debate sweeping reform of financial industry regulation.

The SEC alleged that Paulson & Co, a major hedge fund run by billionaire John Paulson, worked with Goldman in creating a collateralised debt obligation, and stood to benefit as its value fell, costing investors more than USD 1 billion. That is roughly the amount that Paulson is estimated to have made by betting against the CDO.

Fabrice Tourre, a Goldman vice president who the SEC said was principally responsible for creating the product, was also charged with fraud. Paulson was not charged.

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