SEC Charges Goldman Sachs With Fraud

Says firm misled investors on subprime mortgages
By Newser Editors and Wire Services
Posted Apr 16, 2010 10:26 AM CDT
SEC Charges Goldman Sachs With Fraud
Goldman Sach's headquarters is shown, Wednesday, Oct. 14, 2009, in New York.   (AP Photo/Mark Lennihan)

The government is accusing Wall Street powerhouse Goldman Sachs of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering. The SEC today announced civil fraud charges against Goldman and one of its vice presidents. The agency alleges Goldman failed to disclose that one of its clients helped create—and then bet against—subprime mortgage securities that Goldman sold to investors.

Investors in the mortgage securities are alleged to have lost more than $1 billion.The Goldman client implicated in the fraud is one of the world's largest hedge funds, Paulson & Co. Goldman shares fell more than 10% on today's announcement. The civil lawsuit filed by the SEC in federal court in Manhattan was the government's most significant legal action related to the mortgage meltdown. (More Goldman Sachs stories.)

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