Goldman faced civil charges filed by the Securities and Exchange Committee, which accused the bank of defrauding investors in a sub-prime financial product.
“This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing,” the SEC’s director of enforcement Robert Khuzami says.
“Half a billion dollars is the largest penalty ever assessed against a financial services firm in the history of the SEC.”
RBS, one of the largest investors in the Abacus scheme, will receive $100m from the fine. It lost about $840m in the security.
The SEC claimed Goldman allowed hedge fund star John Paulson’s Paulson & Co. to help put together a package of sub-prime mortgages to be sold to clients, but shorted by the manager.
Goldman executives, led by chief Lloyd Blankfein, vehemently denied all the allegations of fraud.
However, the firm acknowledges “the marketing materials for the ABACUS 2007-ACI transaction contained incomplete information”. (with AFP)
