SEC Charges Goldman With Fraud
Here’s what The Wall Street Journal reports:
According to the SEC, Goldman Sachs failed to disclose to investors vital information about the CDO, 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 the CDO.
Earlier this week, I described the Magnetar Trade—the idea that a hedge fund can promote a CDO and bet against the same pool of assets. I have no idea whether the SEC’s charges involve Magnetar, but one thing is clear even now.
Other law suits will follow.
Here’s why. Magnetar was not the only hedge fund that employed a Magnetar Trade strategy. And Goldman was not the only investment bank selling CDOs assembled by hedge funds with negative bets on subprime. According to ProPublica, Magnetar promoted CDOs with nine different banks.
I bet the SEC charges more banks and names hedge funds in the weeks to come. It’s an uh-oh moment for Hedgistan and the gods of Greenwich.
The New York Times describes my novels as “money porn,” “a red-hot franchise,” and “glittery thrillers about fiscal malfeasance.” Through fiction I explore the dark side of money and the motivations of those who have it, want more, and will steamroll anybody who gets in their way.