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The SEC said Paulson paid Goldman roughly $15 million in 2007 to devise an investment tied to mortgage-related securities that the hedge fund viewed as likely to decline in value. Separately, Paulson took out a form of insurance that allowed it to make a huge profit when those securities' value plunged.
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Alex Vilyatser on 13 Jan 11Goldman Sachs tied to hedge funds and shorting of sub-prime mortgage related investments and how Goldman knew they were selling these "doomed to fail" securities
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The SEC alleges that Goldman misled investors by failing to disclose that Paulson & Co. also played a role in selecting the mortgage pools and stood to profit from their decline in value.
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The charges name only Goldman Sachs and Tourre, who was a vice president in his late 20s when the alleged fraud was orchestrated in 2007. Tourre, the SEC said, boasted to a friend that he was able to put such deals together as the mortgage market was unraveling in early 2007.
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In an e-mail to the friend, he described himself as "the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!"