Two men share securities regulation news

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Securities Regulation Daily, August 1, 2013

SEC wins verdict against Goldman Sachs trader Fabrice Tourre

By Matthew Garza, J.D.

A Manhattan jury found former Goldman Sachs trader Fabrice Tourre liable today for making material misstatements and omissions in the marketing of a synthetic collateralized debt obligation (CDO) product sold by Goldman called “ABACUS,” which was tied to the performance of subprime residential mortgage-backed securities. Investors were alleged to have lost over $1 billion in the deal (SEC v. Goldman Sachs & Co., April 16, 2010).

The SEC alleged that Tourre made materially misleading statements and omissions in connection with the ABACUS CDOs to an investor, ACA Management LLC. Specifically, he was accused of failing to disclose that a large hedge fund, Paulson & Co. Inc., had helped select the content of the mortgage-backed securities portfolio, while Paulson simultaneously shorted the portfolio through the purchase of credit default swaps. Tourre was accused of misleading ACA into believing that Paulson took a long position of approximately $200 million in ABACUS and that the hedge fund’s interests were aligned with ACA’s.

Goldman settlement. The SEC announced a $550 million settlement with Goldman Sachs on July 15, 2010, three months after the complaint was filed in the Southern District of New York. Goldman settled the charges without admitting or denying the allegations, but made the following statement in settlement papers: “Goldman acknowledges that the marketing materials for the ABACUS 2007-AC1 transaction contained incomplete information. In particular, it was a mistake for the Goldman marketing materials to state that the reference portfolio was ‘selected by’ ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson's economic interests were adverse to CDO investors. Goldman regrets that the marketing materials did not contain that disclosure.”

Andrew Ceresney, Co-Director of the SEC’s Division of Enforcement, said about the Tourre verdict: “We are gratified by the jury’s verdict finding Mr. Tourre liable for fraud. We will continue to vigorously seek to hold accountable, and bring to trial when necessary, those who commit fraud on Wall Street. As shown by this verdict, we proved that Mr. Tourre, as a Goldman Sachs Vice President, put together a complicated financial product that was secretly designed to maximize the likelihood that it would fail, and marketed and sold it to investors without appropriate disclosure.”

Companies: Goldman Sachs & Co.

MainStory: TopStory AlternativeInvestmentFunds FraudManipulation Enforcement NewYorkNews

Securities Regulation Daily

Introducing Wolters Kluwer Securities Regulation Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.


A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.