NEW YORK ( TheStreet) -- ACA Financial Guaranty is suing Goldman Sachs ( GS) for fraud and is seeking $30 million to $90 million in damages.

The monoline bond insurer, which is operating in run off, says that Goldman misled the company over a synthetic collateralized debt obligation (CDO) called ABACUS. Goldman Sachs developed and sold the CDO in 2007 on behalf of hedge fund Paulson & Co., according to the press release.

ACA claims that Goldman designed ABACUS to fail, so Paulson could short the portfolio and make a $1 billion profit in addition to collecting large fees for investment banking.

"Goldman Sachs fraudulently induced ACA to take a long position in and provide guaranty insurance for ABACUS. Goldman Sachs did so by deceiving ACA into believing that Paulson also was to be a long investor in ABACUS," the release says.

In July Goldman Sachs settled civil charges related to ABACUS with the Securities and Exchange Commission by paying a $550 million fine.

A Goldman Sachs spokesperson did not immediately return calls for comment.

--Written by Maria Woehr in New York.

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