By Michael Ventura
DNAinfo Senior Editor
MANHATTAN — Federal prosecutors have launched a criminal probe of Goldman Sachs to determine whether the Wall Street titan committed securities fraud.
The investigation comes nearly two weeks after the Securities and Exchange Commission hit Goldman with a lawsuit saying it misled investors in a mortgage deal designed to fail, which allowed the firm to reap profits while the US economy tanked. The SEC suit triggered the probe, which is in preliminary stages, several news outlets reported.
"Given the recent focus on the firm, we are not surprised of a report of an inquiry," a Goldman spokesman told the New York Post. "We would fully cooperate with any requests for information."
The investigation will be led by the US Attorney's office in Manhattan, the Wall Street Journal reported.
Goldman executives faced a grueling and profanity-laced grilling earlier this week before a Senate subcommittee, where they denied doing anything wrong in the mortgage deal.
In the investment, known as the Abacus 2007-AC1, Goldman allegedly let an outside hedge fund manager, John A. Paulson, pick mortgage funds in the investment deal in order to bet against them.
The deal was put together by Goldman vice president Fabrice Tourre, who was the only Goldman employee named in the SEC suit.
“I deny — categorically — the SEC.’s allegation," Tourre said at Tuesday's Senate hearing. "And I will defend myself in court against this false claim.”
In the search for possible criminal charges against Goldman Sachs, investigators will have to dig up evidence they knowingly defrauded investors.
"There is a lot to go through. Very dense material. And it will take some time," an unnamed source told the Daily News.
Following the subcommittee hearing, 62 members of the House pushed the Justice Department to launch a criminal probe, the New York Times reported.
