Goldman Sachs hit with investor lawsuit for lying about subprime mortgage CDO designed to lose money

Goldman Sachs was hit with an investor lawsuit on Monday. The lawsuit filed in Manhattan federal court accused Goldman of making materially false and misleading statements about an Abacus collateralized debt obligation tied to subprime mortgages that regulators say it created and marketed though it was designed to lose money.

The complaint also alleged Goldman concealed its receipt of a Wells notice last July from the U.S. Securities and Exchange Commission, indicating potential civil charges over Abacus.

According to the complaint, Goldman's actions caused its shares to trade at inflated levels. The shares fell 12.8 percent on April 16, wiping out more than $12 billion of value, after the SEC filed a civil fraud lawsuit against Goldman.

The lawsuit seeks class-action status and unspecified damages on behalf of potentially thousands of shareholders.

Goldman did not return a request seeking comment. Other executives named as defendants are Chief Operating Officer Gary Cohn and Chief Financial Officer David Viniar.

Goldman Shares closed down $5.37, or 3.4 percent, at $152.03 in afternoon trading on the New York Stock Exchange.

In their lawsuit over the Abacus transaction, the SEC accused Goldman of failing to tell investors that securities underlying Abacus were chosen by billionaire hedge fund investor John Paulson, who was betting that the securities would lose value.

Paulson made about $1 billion on Abacus, roughly the amount other investors are believed to have lost.