Updated with latest share price, company's response to the complaint.

NEW YORK ( TheStreet)-- Goldman Sachs ( GS) "defrauded investors by misstating and omitting key facts" about subprime mortgage securities it sold to investors, according to a complaint filed by the Securities and Exchange Commission Friday.

Goldman shares were hit hard following the news on fears the firm's vaunted reputation may be in jeopardy. The stock was recently trading at $160.99, down nearly 13%. Volume of nearly 48 million was already close to four times the issue's trailing three-month daily average of 12.2 million.

The company issued a terse response to the complaint, saying the charges are "completely unfounded in law and fact" and vowing to "vigorously defend the firm and its reputation."

Specifically, the SEC is alleging that Goldman "structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS)."

The charges involve a transaction that Goldman structured for hedge fund Paulson & Co. that allegedly allowed the fund to take short positions against mortgage securities. Goldman then allegedly marketed a CDO including the subprime securities to clients without telling them that Paulson & Co. had participated in selecting what subprime securities to include, and that it was taking a short position against the CDO.

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement with the SEC, in a press release.

-- Written by Dan Freed in New York.

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