01
May
10

Goldman Sachs under criminal investigation

NEWS
Goldman Sachs under criminal investigation

Saturday, May 1, 2010

Federal prosecutors have opened a preliminary criminal investigation into alleged fraud at Goldman Sachs, sending shares in the Wall Street bank plunging.

Sources confirmed the U.S. attorney’s office had begun liaising with the Securities and Exchange Commission, which brought civil charges against Goldman two weeks ago, accusing it of misleading investors over a $1 billion derivatives deal.

Prosecutors have not yet determined whether there is evidence to bring criminal charges.

Goldman shares fell more than 9 percent on Friday to close at $145. Before the commission sued the company on April 16, its stock stood at $184.

The commission claims the bank cheated customers in a 2007 deal concerning a mortgage-backed security. Goldman allegedly failed to tell investors that U.S. hedge fund Paulson & Co was going “short” by betting that the security would decline in value. Paulson was allegedly allowed to stuff it with mortgages doomed to default. Royal Bank of Scotland backstopped the deal and was left with an $840 million liability.

The British Financial Services Authority is also investigating.

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