Firms Under Investigation For Securities Fraud
Goldman Sachs Securities Fraud Lawyers
Our securities fraud lawyers are offering free case evaluations to Goldman Sachs clients and shareholders who suffered financial damages because of alleged fraud involving a collateralized debt obligation offered by the investment bank known as Abacus 2007-AC1. On April 16, 2010, the U.S. Securities and Exchange Commission (SEC) charged Goldman Sachs with defrauding it clients by allegedly "misstating and omitting key facts" in the marketing of this financial product.
Institutions and investors who suffered financially due to the fraud allegedly committed by Goldman Sachs may be entitled to compensation. If you lost money because of this alleged deception, our Goldman Sachs securities fraud lawyers want to hear from you today. We urge you to contact one of our Goldman Sachs securities fraud attorneys as soon as possible to discuss your legal rights.
Abacus 2007-AC1
Abacus 2007-AC1 was a financial product linked to the performance of subprime mortgages. Goldman Sachs marketed this product right as the housing crisis was beginning to unfold. According to the SEC, Goldman Sachs secretly designed Abacus 2007-ACI to lose value. All told, $10.9 billion of Abacus investments were sold. In the end, investors in Abacus lost more than $1 billion.
According to the SEC, Goldman Sachs created Abacus 2007-AC1 in February 2007 at the request of hedge fund manager John A. Paulson. Paulson, who is not named in the SEC complaint, operates one of the world's largest hedge funds, Paulson & Co. He earned an estimated $3.7 billion in 2007 by correctly betting that the housing market would collapse.
The SEC charged that Goldman Sachs failed to disclose the role that Paulson played in selecting the Abacus portfolio, and did not reveal the fact that his hedge fund had taken a short position against it. Instead, Goldman Sachs told clients that the securities were selected by an independent, objective third party.
According to the SEC, Paulson selected mortgage bonds for Abacus 2007-ACA that he believed were most likely to lose value. Goldman Sachs placed insurance on those bonds — called credit-default swaps — inside Abacus 2007 ACI. This allowed Paulson to bet against the bonds while Goldman Sachs’ clients were betting that the same bonds would make money.
Marketing documents for Abacus indicated that the mortgage bond portfolio would be selected by ACA Management. While they do state that Goldman Sachs could take long or short positions in the bonds, no mention of Paulson’s involvement was made. ACA Management was led to believe that Paulson was positive on mortgages, not negative, and so it did not see a problem with his involvement, the SEC said.
“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio,” Robert Khuzami, the director of the SEC’s enforcement division, said in a written statement.
The day the SEC lawsuit was announced, Goldman Sachs shares closed down 13 percent, wiping away more than $10 billion of the company’s market value. Just a week before the SEC filed charges against Goldman Sachs, the investment bank publicly denied being engaged in the type of conduct detailed by the lawsuit.
Legal Help for Goldman Sachs Clients and Shareholders
Goldman Sachs clients and shareholders who suffered financial damages because of the alleged fraud involving the Abacus financial instrument have valuable legal rights. To protect your rights, contact one of our Goldman Sachs securities fraud lawyers today by filling out our online form or calling 1-800-LAW INFO (1-800-529-4636).