’Fabulous Fab’ trial is a test for US watchdog
SEC needs to show that trader intended to dupe investors about the role played by hedge fund run by billionaire John Paulson in Abacus investment
The trial of former Goldman Sachs bond trader Fabrice “Fabulous Fab” Tourre next week gives the US Securities and Exchange Commission an opportunity to prove that it can win big cases tied to the financial crisis.
The SEC claimed an 85 per cent success rate in all trials last year, but its critics have said that, when it comes to the financial crisis, its win rate has been dismal.
Tourre’s civil fraud trial, which starts in federal court in New York on Monday, could help silence those critics, but experts said the regulator is facing no easy task.
The SEC has said that Tourre, while a vice president at Goldman Sachs in 2007, misled investors in a structured investment vehicle called Abacus 2007-AC1 by not disclosing the role a hedge fund that planned to bet against the transaction played in setting it up.
Investors lost more than US$1 billion (HK$7.76 billion) when the investment vehicle failed, according to the SEC.
Goldman Sachs agreed to pay US$550 million in July 2010 to settle its part of the case, without admitting or denying wrongdoing. Tourre turned down a settlement offer and instead elected to fight, a person familiar with the matter said on Wednesday.