A federal judge has refused to dismiss a class action alleging Goldman Sachs sold substandard synthetic collateralized debt obligations to its customers at the same time it was betting that the price of those instruments would fall. In a suit brought by shareholders who claimed revelations that Goldman Sachs was playing both sides of the fence caused a drop in their share prices, Southern District Judge Paul Crotty (See Profile) rejected the defense that misstatements or omissions made by the bank were not material.
Goldman had asserted that it had only made non-actionable statements of opinion or puffery and that its conflict of interest disclosures in four transactions at issue in Richman v. Goldman Sachs Group, 10 Civ. 3461, foreclosed liability.
