Goldman Sachs sued for fraud - April 18, 2010
"It was a time, Wall Street firms protected them customers. The irony about Christopher Whalen, head of research firm Institutional Risk analitycs in response to the announcement by the SEC (Securities and Exchange Commission) – The U.S. stock market watchdog – the filing of a complaint for fraud against Goldman Sachs.
The U.S. bank would have hid crucial facts about financial products affected by the subprime crisis. Fraud concerns the structuring of CDOs (collateralized debt obligations) linked to subprime subprime.
Goldman Sachs's action was immediately heavily affected by this lawsuit. Around 17h35, the title fell by almost 14% to 160.3 dollars, bringing in its wake many financial stocks and the major global indices.
The SEC accused the bank and one of its vice-presidents, Fabrice Tourre to have misled investors by concealing important facts about the financial product concerned, while the U.S. housing market began to deteriorate.
"Unfounded" according to Goldman Sachs
"The accusations are completely baseless SEC according to law and the facts and we will vigorously contest and defend the firm and its reputation," the bank said in a statement pay day loan lenders.
Around 19 hours, Wall Street was still affected by the news, the Dow Jones dropping 1.31%, to 10,999 points – falling below the psychological 11,100 points high – while the Nasdaq slipped 1.57% to 2476 points – the bar is also crossed 2,500 points down – and the Standard & Poor's 500 yielded 1.75%, to 1190 points, below 1,200 points.
Huge loss for its property fund
On Friday morning, more bad news has been unearthed: the Whitehall Street International Real Estate Fund managed by the U.S. bank would have lost most of its value, according to the annual report sent to investors last month, and published this Friday The Financial Times.
The report highlights poor investments in the U.S., Germany and Japan. Its net assets would be dropped to 30 million euros when it was previously estimated at 1.8 billion euros (1.3 billion euros).