Deutsche Bank Faces Probe Over CDO Paulson Shorted

Jan 30 2012 | 2:05pm ET

Deutsche Bank is in hot water over allegedly allowing Paulson & Co. a hand in picking the mortgage-backed securities that went into a collateralized debt obligation.

The Securities and Exchange Commission is investigating the START CDO, the German magazine Der Speigel reports. The allegations are similar to those that Goldman Sachs paid $550 million to settle a year-and-a-half ago: that the bank allowed the hedge fund to pick the securities that went into the CDO and then failed to tell other investors that Paulson was shorting the CDO.

Deutsche Bank said it will investigate the possible SEC allegations and, if it disagrees with the regulator, will defend any enforcement action.

The SEC last year moved to put an end to the practice of hedge funds participating in CDO structuring, voting to approve new conflict of interest rules for asset-backed securities. The rule forbids banks from allowing third parties that had a hand in selecting the securities for an ABS to short the ABS.

The SEC investigated a number of CDO transactions on the Goldman-Paulson grounds, including several linked to Magnetar Capital. No hedge fund has been accused of any wrongdoing in the process.


In Depth

Q&A: Open Season For Closed-End Funds

Aug 29 2014 | 10:00am ET

When Maury Fertig and Bob Huffman, former Salomon Brothers coworkers, launched...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

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.