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US opens criminal probe into Goldman Sachs trading

Text by News Wires

Latest update : 2010-04-30

According to several news sources, US federal prosecutors have opened a criminal probe to determine whether troubled bank Goldman Sachs committed securities fraud in connection with its mortgage trading.

AFP - Embattled Wall Street titan Goldman Sachs is under criminal investigation by US federal prosecutors, the online edition of The Wall Street Journal said late Thursday.

In its preliminary stage, the investigation by the Manhattan US Attorney's Office is focusing on whether the financial giant or its employees committed securities fraud in connection with its mortgage trading, people familiar with the probe told the daily.

They said the criminal investigation stems from a referral from the Securities and Exchange Commission (SEC).

Earlier this month, the SEC filed civil fraud charges claiming that Goldman allowed a prominent hedge fund to help put together a package of subprime mortgages that were sold to clients, but which the fund was at the same time betting against.

The financial giant allegedly misled investors about mortgage-backed products and made "short" bets that the housing market would collapse as thousands of Americans were forced from their homes.

The company has denied any wrongdoing.

"Given the recent focus on the firm, we are not surprised by the report of an inquiry. We would fully cooperate with any requests for information," a Goldman spokesperson told AFP in an initial reaction to the criminal probe.

The Wall Street Journal's sources pointed out that the criminal investigation is centered on different evidence than the SEC's civil case, and stressed that often criminal probes are launched without the government filing charges.

Date created : 2010-04-30

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