Gothamist
A non-profit newsroom, powered by WNYC.
Gothamist
Listen Live
News
Goldman Sued by SEC for Subprime Mortgage Bond Fraud
By
John Del Signore
Published Apr 16, 2010
Modified Apr 16, 2010
Share
FacebookTwitterRedditEmail
Never miss a story
Email address
By submitting your information, you're agreeing to receive communications from New York Public Radio in accordance with our Terms .
By
John Del Signore
Published Apr 16, 2010
Modified Apr 16, 2010
Share
FacebookTwitterRedditEmail
We rely on your support to make local news available to all
Make your contribution now and help Gothamist thrive in 2026. Donate today
Gothamist is funded by sponsors and member donations
Could it be that Goldman Sachs, the "great vampire squid wrapped around the face of humanity," is sustaining damage to one of its tentacles? This morning the S.E.C. filed a civil suit accusing the firm of securities fraud, sending Goldman's stock plunging. "The product was new and complex, but the deception and conflicts are old and simple," Robert Khuzami, the director of the S.E.C.’s division of enforcement, said in a statement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."
The S.E.C. is accusing Goldman of selling mortgage bonds to investors that they thought might default. This was going on in 2007, and according to the Times, hedge fund manager John A. Paulson "earned" an estimated $3.7 billion by correctly wagering that the housing bubble would burst. While Goldman was selling these bonds—which Paulson believed were most likely to lose value—to investors, Paulson was also buying insurance on them, so that when the bonds plunged and defaults spread, he cashed in on the collapse. The investors lost their shirts.
The S.E.C. charges Goldman with failing to disclose to investors "vital information" about the mortgage bonds. While the bank and Vice President Fabrice Tourre, who is named in the lawsuit, disclosed the ratings of the bonds, they did not disclose that Paulson was simultaneously betting that those ratings were wrong. In a statement defending itself last week, Godman reps said, "We certainly did not know the future of the residential housing market in the first half of 2007 anymore than we can predict the future of markets today." They're not Nostradamus, they just made a lucky bet, that's all.
Tagged
fraud
goldman sachs
John A. Paulson
SEC
subprime mortgage
John Del Signore
Originally from the Albany area, John Del Signore has called NYC home since 1995. In addition to his thousands of meticulously-crafted bespoke blog posts for Gothamist, his writing has also been published in The Awl, Deadspin, The Nervous Breakdown, and performed at The Brick Theater in Brooklyn.
Read more
Gothamist is funded by sponsors and member donations
Gothamist is funded by sponsors and member donations
MORE news
NYC’s horse carriage drivers feel betrayed as lawmakers set to abolish industry
Central Park's horse carriage drivers are making their last stand as city lawmakers prepare to abolish the industry.
By
Liam Quigley
Published Oct 21, 2026 at 6:00 a.m. ET
Parents grumble as NYC schools chancellor dodges calls for NYC schools integration plan
Journalist Nikole Hannah-Jones said she felt disappointed by the lack of details.
By
Jessica Gould
News
Parents grumble as NYC schools chancellor dodges calls for NYC schools integration plan
Journalist Nikole Hannah-Jones said she felt disappointed by the lack of details.
By
Jessica Gould
Driver found with apparent gunshot wound on George Washington Bridge, officials say
By
Charles Lane
16 arrested in New York auto insurance fraud crackdown involving nearly $500K
By
Giulia Heyward
Coney Island's small, 1890s lighthouse may be landmarked by the city
By
Catalina Gonella
Never miss a story
Catch up on the most important headlines with a roundup of essential NYC stories, delivered to your inbox daily.
Sign upEmail address
By submitting your information, you're agreeing to receive communications from New York Public Radio in accordance with our Terms .