Law enforcement officials on Thursday told the Wall Street Journal [media website] that the US Department of Justice (DOJ) [official website] is opening a criminal investigation [WSJ report] of Goldman, Sachs & Co. [corporate website] for possible securities fraud in mortgage trading. Two weeks ago, the US Securities and Exchange Commission (SEC) [official website; JURIST news archive] filed civil charges [JURIST report; WSJ backgrounder] against Goldman Sachs. While the SEC referred the case to the DOJ, the criminal case will focus on different evidence. It is not certain yet whether criminal charges will be filed against Goldman Sachs.
The German government announced [JURIST report] that it was considering legal action against Goldman Sachs just two days after the SEC filed a civil suit [complaint, PDF] against the bank. The SEC complaint, filed in the US District Court for the Southern District of New York [official website], alleges that Goldman made misleading statements and omissions to investors in early 2007 in violation of the Securities Act of 1933 [text, PDF] and Securities Exchange Act of 1934 [text, PDF]. Goldman's alleged conduct in marketing collateralized debt obligations (CDOs) [Investopedia backgrounder] to investors lies at the core of the controversy. Goldman responded [press release] to the allegations by denying all wrongdoing. The SEC is seeking "injunctive relief, disgorgement of profits, prejudgment interest, civil penalties and other appropriate and necessary equitable relief from both defendants," remedies considered appropriate in securities fraud cases.