ACA Management, the placement agent of the infamous $2 billion synthetic CDO (collateralized debt obligation), known as ABACUS 2007-AC1, has filed suit against Goldman Sachs citing fraud and unjust enrichment from ABACUS.
ACA is suing the Wall Street giant for $120 million—$30 million in compensatory damages and $90 million in punitive damages.
The lawsuit claims that Goldman deceived ACA into believing the hedge fund group Paulson & Company, was the equity investor in ABACUS and thus misrepresented the role the hedge fund was playing in the synthetic CDO, for which Paulson was actually the short in the CDO’s collateral—meaning that Paulson was betting against subprime mortgage securities that were referenced in the CDO
"In truth, ABACUS was worthless at the time Goldman Sachs marketed it to ACA. Had Paulson's true role as a short investor selecting the portfolio been known, neither ACA nor anyone else would have taken a long position in it," according to the complaint filed by ACA.
You may recall in the spring of last year the enormous attention that was given to the SEC's charges of fraud against Goldman over the prospectus for the synthetic CDO, which later was settled with the Wall Street firm agreeing to pay a record-setting fine of $550 million.