The Goldman Sachs employee who ran the firm’s mortgage correlation trading desk testified that Fabrice Tourre failed to tell investors about the role of Paulson & Co. in the deal at the center of the U.S. Securities and Exchange Commission’s fraud case against him.
Bloomberg News reports that Jonathan Egol, now a Goldman Sachs managing director, told jurors in Manhattan federal court Thursday that he is 'not aware of any' disclosures to investors that Paulson, the New York hedge fund that stood to make money from the failure of Abacus 2007-AC1, a synthetic collateralized debt obligation, helped select the mortgage-backed assets underlying it.
Egol said Tourre did make sure to tell a superior that Paulson helped pick the portfolio of 90 subprime mortgage-backed securities when Goldman’s money was at risk.
The SEC sued Tourre and Goldman Sachs in 2010 over the Abacus transaction. Paulson, run by billionaire John Paulson, used the deal to bet against mortgage-backed securities. Investors on the other side of the bet lost more than $1bn. Goldman Sachs paid a then-record $550m to settle the case.
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