$13bn suit allowed to proceed as class action against Goldman Sachs

by Francis Monfort17 Aug 2018

A $13 billion lawsuit brought by Goldman Sachs Group shareholders against the company has been allowed to proceed as a class action, according to a report by Bloomberg.

In the lawsuit, Goldman Sachs shareholders allege they were defrauded by the company when it failed to disclose conflicts of interest about investments connected to mortgages it sold prior to the financial crisis.

The case stems from collateralized debt obligations (CDOs) the bank created and sold just as the housing market started to collapse. Among these was the Abacus CDO, which in 2010 became the focus of an SEC case that resulted in Goldman settling claims related to the marketing of the investments for $550 million.

The Arkansas Teacher Retirement System and other investors claim that Goldman Sachs made statements about the CDOs that were false and misleading since the bank was acting directly against its clients’ interests.

Although the investors had initially been allowed to sue as a class, the grant was later reversed before an appeals court, which said there was a need to look into whether the misrepresentations affected Goldman Sachs’ share price.

In granting the class action request, US District Judge Paul Crotty in Manhattan said Goldman Sachs failed to show that its share price wasn’t impacted.

Elliott Stein, a senior litigation analyst with Bloomberg Intelligence, predicts that the case will eventually be resolved for $65 million to $325 million, in line with similar class-action suits from 2006 to 2016.

 

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