– From “Front and Center”, by Bud Burrell –
On Friday, April 16, the SEC announced the civil indictment of Goldman Sachs for securities fraud in the structuring and sale of collateralized debt obligations in connection with a $1 Billion offering of securities it sold in cooperation with the hedge fund Paulson and Company. The charges, which are alleged at this point, appear to be the product of a disgruntled Paulson employee becoming a whistleblower to the SEC, rolling on a mid-level trader at Goldman alleged to have been also involved in the fraud.
The allegations, which may change with the passage of time, are that Goldman executives worked with Paulson persons to construct a portfolio of debt obligations totaling $1 Billion, which was intended to fail from before its sale, and which was purportedly shorted while being structured and sold to buyers. This comes on the heels of industry rumors of similar behavior by Goldman in its sale of Greek Sovereign Debt, also while they hedged with short transactions including the purchase of Credit Default Swaps on Greek credit. [entire post]