The federal government has charged Wall Street’s most influential investor, Goldman Sachs & Co., of fraud.
The company, authorities say, didn’t tell its investors that mortgage securities it sold were crafted by a man betting on them to fail.
Goldman Sachs’ client, Paulson & Co., is accused of gaining at least $1 billion in the investment fraud. Thousands of investors lost at least that amount over time with the once-trusted name on Wall St.
The Goldman Sachs fraud ring is believed to have been behind the massive housing market failure that’s put thousands or more out of their homes, and more out of jobs.
When Paulson’s bubble burst, it send financial markets into tail-spin, and has left the country reeling in massive recession.
Goldman Sachs has defended its previous actions and called the government’s accusations “completely unfounded in law and fact,” according to an AP report.
The Securities and Exchange Commission wants to get lost investment money back from Goldman Sachs, and is likely to impose massive civil fines against the firm.
Regulators believe Paulson paid Goldman Sachs $15 million three years ago to create an investment scheme tied to mortgage securities that were likely going to decline in value over time. Paulson then purchased an insurance that gained him a profit when those securities failed.
Two European banks are believed to have lost another $1 billion from buying these securities.