Bond insurance company ACA Financial Guaranty Corp is seeking about $120 million in damages from Goldman. The bond insurer claims Goldman “fraudulently concealed” details about a subprime mortgage-backed investment product, according to a Reuters report.
The lawsuit had been dismissed, but a 5-2 decision in New York’s Court of Appeals Thursday reversed that ruling.
ACA claims in its lawsuit that Goldman Sachs did not disclose that a hedge fund investing in the product was betting on it to fail. The lack of that knowledge, the lawsuit claims, cost ACA hundreds of millions of dollars.
A Goldman Sachs spokesperson told Reuters that Thursday’s ruling was disappointing, but said the company was confident ACA’s lawsuit would not succeed.
It looks like Goldman Sachs will have to defend against a lawsuit over shoddy mortgage bonds after all.