The report from Levin/Coburn described Paulson's part in the deal thusly:
"In the case of Abacus, Goldman did not take the short position, but allowed a hedge fund, Paulson & Co. Inc., that planned on shorting the CDO to play a major but hidden role in selecting its assets. Goldman marketed Abacus securities to its clients, knowing the CDO was designed to lose value and without disclosing the hedge fund’s asset selection role or investment objective to potential investors. Three long investors together lost about $1 billion from their Abacus investments, while the Paulson hedge fund profited by about the same amount. Today, the Abacus securities are worthless." (Page 10 of Wall Street and the Financial Crisis: Anatomy of a Financial Collapse by Levin and Coburn)
Paulson Named in ACA's Revised Goldman Sachs CDO Suit
By David McLaughlin - Bloomberg
Paulson & Co., the New York hedge fund, was named as a defendant in a proposed revised lawsuit by ACA Financial Guaranty Corp. (MANF) against Goldman Sachs Group Inc. (GS) over a collateralized debt obligation called Abacus.
Paulson and Goldman Sachs conspired to induce ACA to provide financial guaranty insurance for the Abacus deal, which was “doomed to fail,” the firm said in papers filed yesterday in New York State Supreme Court in Manhattan. ACA, which sued Goldman Sachs in 2011, is seeking court permission to file a revised complaint adding Paulson as a defendant.
“The proposed amended complaint properly pleads that, at a bare minimum, Paulson gave Goldman Sachs substantial assistance in achieving the fraud,” ACA said.
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