The title taken, of course, from Matt Taiibi's superb description of Goldman Sachs: A vampire squid wrapped around the face of humanity. The SEC, rousing itself from the persistent vegetative state which characterized its handling of the Bernie Madoff affair, is hacking away at GS's flailing tentacles in much the same way that Captain Nemo, in James Mason's protrayal in "20,000 Leagues Under the Sea," fought the giant squid trying to wreck the Nautilus.
Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc. (“Paulson”), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process. After participating in the selection of the reference portfolio, Paulson effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (“CDS”) with GS&Co to buy protection on specific layers of the ABACUS 2007-AC1 capital structure.
Goldman Sachs Never Represented to ACA That Paulson Was Going To Be A Long Investor. The SEC's complaint accuses the firm of fraud because it didn't disclose to one party of the transaction who was on the other side of that transaction. As normal business practice, market makers do not disclose the identities of a buyer to a seller and vice versa. Goldman Sachs never represented to ACA that Paulson was going to be a long investor.