Goldman: Expect More Paulson CDO Lawsuits

May 11 2010 | 11:43am ET

Goldman Sachs will face more lawsuits and further investigations over its role in structuring a collateralized debt obligation for hedge fund Paulson & Co., the Wall Street giant said yesterday.

In its quarterly filing with the Securities and Exchange Commission—which has accused Goldman of fraud in the $1 billion 2007 transaction—the bank said that the SEC lawsuit, criminal probe and six shareholder lawsuits could be only the beginning.

“We anticipate that additional putative shareholder derivative actions and other litigation may be filed, and regulatory and other investigations and actions commenced against us with respect to offering CDOs,” it said.

The SEC says Goldman misled investors about Paulson’s role in the CDO in question, called ABACUS-AC1-2007. The regulator alleges that Paulson played a role in the selection of the mortgage-backed securities that went into the deal, paying Goldman $15 million to structure and market it. The SEC also accuses Goldman of failing to tell investors that the hedge fund was shorting the CDO through credit default swaps it bought from the bank.

Paulson has not been accused of any wrongdoing, and Goldman has denied any wrongdoing on its part. But the bank is reportedly in preliminary talks with the SEC about a settlement, which could see the bank acknowledge negligence or poor process, as well as pay up to $5 billion.

Goldman is also facing a half-dozen shareholder lawsuits, accusing the firm of failing to inform them of the Wells notice it received in the Paulson case last summer. A Wells notice indicates that the SEC plans to bring an enforcement action against a firm.


In Depth

Hedge Fund Veteran Peter Borish Talks Trading

Dec 17 2014 | 9:32am ET

Peter Borish says 2014 was “tricky” from a trading perspective. “The best...

Lifestyle

Cohen Donates $1.5M To GOP Governors Association

Dec 10 2014 | 7:13am ET

The Republican Governors Association raised close to $25 million from October 1...

Guest Contributor

Q&A With Daniel Gallancy: Institutional Interest In Bitcoin Is Growing Steadily

Dec 12 2014 | 7:54am ET

Daniel Gallancy is founder and CEO of SolidX, a provider of total return swaps for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.