Following a jury finding ex-former Goldman Sachs Group (GS) trader Fabrice Tourre liable for bilking investors in a synthetic collateralized debt obligation that failed, U.S. District Judge Katherine Forrest ordered him to pay over $825,000. Tourre is one of the few persons to be held accountable for wrongdoing related to the financial crisis. In addition to $650,000 in civil fines, Tourre must surrender $185,463 in bonuses plus to interest in the Securities and Exchange Commission’s case against him.
The regulator accused Tourre of misleading ACA Capital Holdings Inc., which helped to select assets in the Abacus 2007-AC1, and investors by concealing the fact that Paulson & Co., a hedge fund, helped package the CDO. Tourre led them to believe that Paulson would be an equity investor, instead of a party that would go on to bet against subprime mortgages. Paulson shorted Abacus, earning about $1 billion. This is about the same amount that investors lost.
Judge Forrest noted that for the transaction to succeed, the fraud against ACA had to happen. She said that if ACA had not been the agent for portfolio selection, Goldman wouldn’t have been able to persuade others to get involved in the transaction’s equity. It was last year that the jury found Tourre liable on several charges involving Abacus.
Also, in 2010 Goldman settled for $550 million with the SEC a related securities fraud case. The regulator accused the firm of misleading investors about the Abacus 2007-AC1 and misstating and leaving out key information about the CDO, which depended on subprime residential mortgage-backed securities.
The firm, however, resolved the charges without deny or admitting wrongdoing—although it did admit and regret the inadequacy of its marketing materials. $250 million was designated for investors and the rest was to go to the US Treasury.
Please contact our securities attorneys at The SSEK Partners Group today and ask for your free case assessment.
Big fine imposed on ex-Goldman trader Tourre in SEC case, Reuters, March 12, 2014
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Goldman Sachs Must Contend with Proposed Class-Action CDO Lawsuit, Institutional Investor Securities Blog, January 22, 2014
Ex-Goldman Sachs Trader Fabrice Tourre’s Request for New Civil Trial in RMBS Fraud Case is Denied, Institutional Investor Securities Blog, January 10, 2014
Goldman Sachs Cleared in Securities Fraud Case Against Dragon Systems for Losses Related to $250M Loss in Sale to Lernout & Haspie, Stockbroker Fraud Blog, January 31, 2013