Goldman Sued Over Paulson CDOs

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.

To contact the writer of this article, click here: Maria Woehr.

To follow the writer on Twitter, go to http://twitter.com/newsgirlmw.

To submit a news tip, send an email to: tips@thestreet.com.

More from Stocks

9 Stocks Goldman Sachs Thinks Will Blow Wall Street's Performance Away in 2019

9 Stocks Goldman Sachs Thinks Will Blow Wall Street's Performance Away in 2019

Video: Athens Stock Exchange CEO on What's Next for Greece's Debt Woes

Video: Athens Stock Exchange CEO on What's Next for Greece's Debt Woes

AMD Shares Are Soaring, But How Long Can the Good Times Last?

AMD Shares Are Soaring, But How Long Can the Good Times Last?

Ford CEO Jim Hackett Driving Future of Mobility in Detroit - Ford Jr. Cheers

Ford CEO Jim Hackett Driving Future of Mobility in Detroit - Ford Jr. Cheers

What Angela Merkel's Uncertain Political Future Means for Greece's Debt Woes

What Angela Merkel's Uncertain Political Future Means for Greece's Debt Woes