CNN Breaking News - Goldman Sachs Charged by SEC

-- SEC charges Goldman Sachs with defrauding investors about products tied to subprime mortgages.

SEC charges Goldman Sachs with fraud
By Colin Barr, senior writerApril 16, 2010: 10:57 AM ET

(Fortune) -- The Securities and Exchange Commission on Friday charged Wall Street's most gilded firm, Goldman Sachs, with defrauding investors in a sale of securities tied to subprime mortgages.

The SEC said it charged New York-based Goldman (GS, Fortune 500) and a vice president, Fabrice Tourre, for their failure to disclose conflicts in a 2007 sale of a so-called collateralized debt obligation. Investors in the CDO ultimately lost $1 billion, the SEC said.

The SEC's civil fraud complaint alleges that Goldman allowed hedge fund Paulson & Co. -- run by John Paulson, one of the biggest winners in the subprime collapse -- to help select securities in the CDO and didn't tell investors that Paulson was shorting the CDO, or betting its value would fall.

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, director of the Division of Enforcement for the SEC.

"Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party," he said.

Goldman shares tumbled 10% in midmorning trading on the SEC announcement. A Goldman spokesperson didn't immediately return a call seeking comment.

Source: CNN

NOTE: We didn't expect to see this day come! Now we can hope this is the tip of the iceberg and the SEC is prepared to take measures against other financial groups.