Goldman Sachs accused of sub-prime fraud

Goldman Sachs was today accused of fraud by a US financial watchdog over the make-up and marketing of a debt product tied to sub-prime mortgages.

In a civil suit, the Securities and Exchange Commission (SEC) alleges the investment bank structured and marketed a synthetic 'collateralized debt obligation' (CDO) called ABACUS that hinged on the performance of subprime residential mortgage-backed securities and which cost investors more than $1bn. It says Goldman did not tell investors "vital" information about the structure of ABACUS, including that a major hedge fund, Paulson & Co, was involved in choosing which securities would be part of the portfolio and had taken a short position against the product in a bet its value would fa...