Today, the SEC brought a securities fraud action against Goldman Sachs (NYSE: GS) for “making materially misleading statements and omissions in connection with” a CDO called ABACUS 2007-AC1 (“ABACUS”). Goldman Sachs structured and marketed ABACUS to investors.
According to the SEC, “Goldman Sachs failed to disclose to investors vital information about [ABACUS], in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against [ABACUS].” “The product was new and complex but the deception and conflicts are old and simple,” said Robert Khuzami, Director of the Division of Enforcement of the SEC. “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,” added Khuzami. Investors in ABACUS lost over $1 billion.
Presently, K&T is prosecuting numerous arbitration claims on behalf of aggrieved investors to recover losses sustained in mortgage-backed securities and structured asset-backed securities. These claims have been filed with FINRA Dispute Resolution. Retail and institutional investors who have sustained losses in the ABACUS CDO can contact K&T to explore their legal rights and options.