Goldman Sachs

In early 2007, Goldman Sachs created a synthetic collateralized debt obligation called ABACUS 2007-AC1 and sold it to investors as a product with securities selected by an independent manager. Goldman did not disclose the material fact that hedge fund Paulson & Co. had quietly helped select the underlying securities — specifically choosing the mortgage bonds it believed were most likely to fail — and was simultaneously betting against the product via credit default swaps. Investors lost approximately $1 billion. Paulson & Co. made approximately $1 billion on the same transaction. Goldman collected fees. In July 2010, Goldman settled with the SEC for $550 million — the largest settlement obtained from a Wall Street firm at the time — and acknowledged that its marketing materials "contained incomplete information." Goldman did not admit fraud. No Goldman executive was criminally charged. In April 2011, the Senate Permanent Subcommittee on Investigations released a 635-page bipartisan report documenting internal Goldman emails in which employees described CDO products they were selling to clients as a "shitty deal" and "one more shitty deal." Senator Carl Levin read those emails into the record at a nationally televised hearing at which Lloyd Blankfein testified. In August 2012, the DOJ declined to bring criminal charges.

• —Goldman created ABACUS 2007-AC1 without disclosing that Paulson & Co. helped select the reference portfolio and was simultaneously shorting it.
• —Investors lost ~$1 billion. Paulson & Co. made ~$1 billion. Goldman collected fees.
• —SEC settlement: $550 million — largest SEC settlement from a Wall Street firm at the time. Goldman acknowledged "incomplete information" without admitting fraud.
• —Goldman VP Fabrice Tourre was tried in 2013; a federal jury found him liable on 6 of 7 counts. Personal fine: $650,000. Barred from the securities industry.
• —Senate PSI (April 2011): 635-page bipartisan report. Internal Goldman emails describe CDOs they sold clients as a "shitty deal" and "one more shitty deal."
• —Senator Carl Levin read the emails at a nationally televised hearing. Blankfein testified.
• —DOJ declined to bring criminal charges against any Goldman executive — August 2012. The VP went to court. The bankers who designed and approved the deal did not.

Between 2012 and 2013, Goldman Sachs arranged and underwrote three bond offerings for 1Malaysia Development Berhad (1MDB), a Malaysian government sovereign wealth fund, raising $6.5 billion in total. Goldman earned approximately $600 million in fees — more than 9% of proceeds, compared to the 1–2% market standard. The anomalous spread was the price of not asking questions. According to the Federal Reserve's enforcement action, "certain former Goldman bankers in Asia collaborated with Malaysian businessman Low Taek Jho and others to redirect substantial portions of the bond proceeds for personal gain and to provide bribes to foreign government officials." Goldman's internal controls "failed to detect or prevent the scheme or to address obvious red flags around the 1MDB offerings." Over $4.5 billion was stolen from the Malaysian people. The money funded luxury real estate, art, yachts, diamond jewelry, and $100 million to finance The Wolf of Wall Street (2013). Goldman Sachs (Malaysia) Sdn Bhd pleaded guilty in October 2020 to conspiracy to violate the Foreign Corrupt Practices Act — one of only three major global banks to plead guilty to a crime since the 2008 crisis. Tim Leissner, Goldman's Chairman of Southeast Asia and partner since 2006, pleaded guilty in 2018 to personally stealing ~$200 million and to FCPA conspiracy. Sentenced to two years in May 2025. Roger Ng, Goldman's Malaysia head, was convicted at trial in March 2022 and sentenced to ten years. Jho Low, the Malaysian businessman at the center of the scheme, remains a fugitive. Total global penalties: approximately $5 billion.

• —Three bond offerings, 2012–2013. Total raised: $6.5 billion. Goldman fees: ~$600 million — more than 9% of proceeds vs. 1–2% market standard.
• —Federal Reserve enforcement action: Goldman controls "failed to detect or prevent the scheme or to address obvious red flags."
• —$4.5B+ stolen: luxury real estate ($33.5M Manhattan condo), art (Picasso, Basquiat — seized), yachts (Equanimity — seized), $8M diamond jewelry (returned by Miranda Kerr), $100M to finance The Wolf of Wall Street.
• —Goldman Sachs (Malaysia) Sdn Bhd: guilty plea, October 2020. FCPA conspiracy. One of three major banks to plead guilty to a crime since 2008.
• —Tim Leissner (partner, SE Asia chairman since 2006): guilty plea 2018. Stole ~$200M. Sentenced 2 years, May 2025. SEC: lifetime bar from securities industry.
• —Roger Ng (Malaysia head): convicted at trial March 2022. Sentenced 10 years.
• —Total global settlements: DOJ $2.906B + Fed $154M + Malaysia $2.5B cash + Malaysia $1.4B asset guarantee + international regulators ~$200M+ = $5B+.
• —Malaysia simultaneously dropped all criminal charges against Goldman — a decision widely criticized as politically motivated. Jho Low: fugitive.

Rajat Gupta served as a Goldman Sachs board director. In 2008, Gupta repeatedly tipped hedge fund manager Raj Rajaratnam of Galleon Group with material non-public information obtained from Goldman board meetings — including advance notice of a $5 billion Berkshire Hathaway investment in Goldman Sachs at the height of the 2008 financial crisis. Rajaratnam traded on the tips and profited. Gupta was convicted in June 2012 on four federal felony counts of conspiracy and securities fraud, and sentenced to two years in prison and $5 million in fines. His conviction was upheld on appeal in 2019. Rajaratnam was convicted separately in 2011 in what was described as the largest insider trading case in US history at the time. Goldman Sachs itself faced no institutional consequences. Zero Goldman compliance procedures flagged Gupta's repeated calls to Rajaratnam from the boardroom. The firm conducted its board meetings as before. No Goldman executive was charged.

• —Gupta served as a Goldman Sachs board director and tipped Rajaratnam with material non-public information from board meetings.
• —Tip at issue: $5 billion Berkshire Hathaway investment in Goldman — disclosed to Rajaratnam before it was public, during the 2008 financial crisis.
• —Gupta conviction: June 2012. Four federal felony counts: conspiracy and securities fraud. Two years prison. $5 million fine.
• —Gupta conviction upheld on appeal, 2019.
• —Raj Rajaratnam (Galleon): convicted separately, 2011. 11 years prison. Largest insider trading case in US history at the time.
• —Goldman Sachs: no institutional charges, no enforcement action, no compliance findings. The firm was the site of the crime. Nothing changed.

When the US government bailed out AIG in September 2008 with $182 billion — one of the largest government rescues in history — AIG used bailout funds to pay counterparties on credit default swaps at full par value, 100 cents on the dollar. Goldman Sachs received $12.9 billion — the single largest payment to any AIG counterparty. Goldman had purchased credit default swap protection from AIG against the collapse of mortgage securities Goldman was simultaneously selling to clients. When AIG collapsed, Goldman was positioned to collect. When the US government bailed out AIG, it made Goldman whole at full value rather than at the distressed market value, which would have been cents on the dollar. The New York Fed — led at the time by Timothy Geithner, who had longstanding Goldman relationships — structured the AIG rescue in a way that made Goldman and other counterparties whole without negotiation. The Special Inspector General for TARP (SIGTARP) later criticized the decision to pay counterparties at par as a windfall to sophisticated financial institutions that had no legitimate expectation of full payment. The DOJ declined to prosecute Goldman executives. Goldman kept the $12.9 billion.

• —AIG bailout, September 2008: $182 billion in US government support. AIG paid counterparties at 100 cents on the dollar.
• —Goldman received $12.9 billion — the largest single counterparty payment of any AIG bailout beneficiary.
• —Goldman had purchased CDS protection from AIG against the same mortgage securities it had sold clients — then collected when the US government rescued AIG.
• —NY Fed (Geithner) structured the AIG rescue to pay counterparties at par without negotiation. SIGTARP found this was a windfall; counterparties should have been negotiated down.
• —DOJ declined to prosecute Goldman executives in August 2012.
• —Goldman kept $12.9 billion. No charges. No restitution. No accountability for the conflict of interest between what Goldman sold clients and what it insured against.