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SEC Says Goldman Investors Were Not Told About 'Opposite Economic Interest'

Friday, 16 Apr 2010 | 4:03 PM ET

The director of the SEC's enforcement division told CNBC, "There is a fundamental difference between somebody being short on a synthetic CDO or taking a view that the assets will perform poorly" in reference to civil fraud charges filed against Goldman Sachs on Friday.

Robert Khuzami said "...there’s a world of difference between that and letting that person be involved in the selection process of that portfolio.” (Watch more of Khuzami's remarks about the charges below).

The charges against Goldman and one of its vice presidents, Fabrice Tourre, accuse the firm of "defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter."

SEC's Khuzami on Goldman
SEC's Robert Khuzami discusses the fraud charges brought by the SEC against Goldman Sachs.

Let's remember that synthetic the Collateralized Debt Obligations or CDOs market was one that had no regulation. They were unrestricted securities being sold to centrally sophisticated investors.

My expectations, based on sources I've spoken with and the lawyers they've hired, is there may be more charges to come for various different firms. We'll see what follows this.

But, when it comes to fraud, the greatest fraud was of the actual mortgages underlying all of this. That was were the true fraud was and nobody went after them.

More Details on SEC Complaint Against Goldman:

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Questions? Comments? Write to faberreport@cnbc.com.

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