Goldman hit with $120M mortgage fraud suit

Six months after Goldman Sachs paid $550 million to settle government fraud charges related to a mortgage deal, it’s getting hit with a second suit over the same bonds. ACA Financial Guaranty, which had held bond insurance and invested in the Abacus collateralized debt obligation, or CDO, is accusing Goldman of “fraudulent activities” for “unjust enrichment,” and is suing the firm for at least $120 million, the Post reported. The suit alleges that Abacus was “worthless” and that it was “misled by Goldman’s fraudulent activities.” The Securities and Exchange Commission charged that Goldman set up Abacus to fail so that its big hedge fund client, Paulson, could benefit. Goldman settled with the SEC without admitting any guilt. The deal grew out of the 2007 gold rush in housing securities, in which bad mortgages were packaged as CDO securities that proved toxic, destroying investments across the globe. [Post]

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