Big CDO Investor Sues Goldman

Jan 7 2011 | 8:53am ET

The largest investor in a controversial Goldman Sachs collateralized debt obligation has sued the firm, which the Securities and Exchange Commission accused last year of misleading it about the role of hedge fund Paulson & Co. in the CDO.

ACA Financial Guaranty said it was "misled by Goldman's fraudulent activities" and alleged that the CDO, called ABACUS-2007-AC1 was already "worthless" when Goldman marketed it to ACA. ACA bought millions of dollars worth of Abacus notes and insured part of the portfolio for $909 million.

In its own lawsuit against Goldman filed in late 2009—settled in May for $550 million—the SEC accused the Wall Street giant of hiding Paulson's role from ACA. The agency alleges that the CDO was structured and marketed on behalf of Paulson, which shorted it, earning about $1 billion in profits.

An ACA unit, ACA Management, was employed by Goldman to select the residential mortgage-backed securities to go into the CDO. Paulson, which has not been accused of wrongdoing in the case, allegedly suggested 123 RMBS, of which ACA rejected 68.

ACA is seeking $120 million in damages in its suit, filed yesterday in New York state court.


In Depth

Bob Doll's Ten Market Predictions For 2016

Jan 7 2016 | 9:37pm ET

Well-known market strategist Robert Doll has published his annual list of ten predictions...

Lifestyle

Citadel's Ken Griffin Donates $40M To New York's Museum of Modern Art

Dec 22 2015 | 9:23pm ET

Citadel founder Ken Griffin has donated $40 million to New York’s Museum of Modern...

Guest Contributor

Hedge Fund Marketing - Making the Most of Your Salesperson

Jan 20 2016 | 8:11pm ET

In this contributed article, Bruce Frumerman of Frumerman & Nemeth takes a close...