This article details the wider ramifications of this news. It links to a list of banks and transactions over the last 4 years.
GS is just the start.
The ProPublica Blog
With lead blogger Marian Wang, were re-mixing today's accountability stories. We're also just starting this, so e-mail Marian your ideas. Other Major Banks Did Deals Similar to Goldmans by Marian Wang, ProPublica - April 16, 2010 1:36 pm EDT
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A man walks past Goldman Sachs' new headquarters in Lower Manhattan on April 16, 2010. The SEC has filed civil fraud charges against the investment bank. (Mario Tama/Getty Images) A man walks past Goldman Sachs' new headquarters in Lower Manhattan on April 16, 2010. The SEC has filed civil fraud charges against the investment bank. (Mario Tama/Getty Images)
As you may have heard, Goldman Sachs is being sued for fraud [1] by the Securities and Exchange Commission [2] for allegedly misleading investors about a deal that Goldman helped structure and sell. In the civil suit, the SEC specifically faulted Goldman for failing to disclose that a hedge fund was helping create the investment while betting big the deal would fail.
According to the SEC, Goldman Sachs knew about the hedge fund's bets, knew it played a significant role in choosing the assets in the portfolio, and yet did not tell investors about it. (Goldman Sachs has called the SEC's accusations "completely unfounded in law and fact." And in another more detailed statement [3], it said it "did not structure a portfolio that was designed to lose money.")
As we reported at ProPublica last week, many other major investment banks were doing a similar thing [4].
Investment banks including JPMorgan Chase [5], Merrill Lynch [6] (now part of Bank of America), Citigroup, Deutsche Bank and UBS also created CDOs that a hedge fund named Magnetar was both helping create and betting would fail. Those investment banks marketed and sold the CDOs to investors without disclosing Magnetar's role or the hedge funds interests.
