According to court filings, bond insurer ACA Financial is asking to revise its complaint against Goldman Sachs to include hedge fund manager John Paulson as a defendant, Bloomberg reports.This all has to do with Goldman’s notorious Abacus deal.
The bank already paid $550 million in fines back in 2010 to settle charges stemming from an SEC investigation into the deal.
The SEC alleged that Goldman failed to tell investors that John Paulson’s hedge fund, Paulson & Co., helped to choose and bet against the subprime mortgage securities underlying Abacus.
That’s where ACA comes in. Last year the insurer sued Goldman for inducing it to provide insurance for the deal using collateralized debt obligations — CDOs.
ACA Financial Guaranty said in its lawsuit that the CDO was designed to fail so that Paulson could reap “huge profits” and Goldman Sachs could reap “huge fees.”
It said Goldman deceived ACA into believing that Paulson was to be the long investor in the product when the bank knew he would take a short position.
We’ll keep you posted when we know whether or not the Paulson is acceptable to the Court.