"Undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. hedge fund... played a significant role in selecting which RMBS should make up the portfolio."John Paulson, if you recall, was lauded by congress for seeing the crises ahead of time.
"...after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Goldman Sachs did not disclose Paulson & Co.'s short position... to investors."
"The deal closed on April 26, 2007, and Paulson & Co. paid Goldman Sachs approximately $15 million for structuring and marketing ABACUS. By Jan. 29, 2008, 99 percent of the portfolio had been downgraded."
"Investors in the liabilities of ABACUS are alleged to have lost more than $1 billion."
Source: SEC Charges Goldman Sachs With Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages
