Supreme Court to decide whether Goldman Sachs shareholders can bring suit in major fraud case
Tucker Higgins, 28 March 2021
The Supreme Court is set to hear arguments from Goldman Sachs in a long-running case that could have major implications for shareholders seeking to bring securities-fraud lawsuits.
Arguments are scheduled to begin at 10 a.m. ET Monday and will be streamed live as the court continues to meet remotely as a precaution against Covid-19.
The case, which dates to the Great Recession, concerns statements that the investment bank made while it was marketing “Abacus,” an investment known as a synthetic collateralized debt obligation.
Goldman advertised Abacus to its clients without disclosing that hedge fund manager John Paulson played a role in selecting its portfolio of subprime mortgages. Paulson’s hedge fund, Paulson & Co., had placed enormous bets on Abacus’ failure.
After Abacus collapsed amid the housing crisis, Paulson made $1 billion and Goldman’s customers lost about the same amount. Goldman ultimately paid $550 million to settle fraud charges brought by the Securities and Exchange Commission in 2010 — the largest ever penalty faced by a Wall Street bank. In the settlement, the bank didn’t admit or deny the allegations.
The shareholders bringing the lawsuit, including the Arkansas Teacher Retirement System and a pension fund for plumbers and pipefitters, have said they lost as much as $13 billion when Goldman’s stock tumbled following disclosures of the SEC’s fraud investigation.
