John Paulson will be called by the defense to testify in the U.S. Securities and Exchange Commission’s civil fraud case against former Goldman Sachs Group Inc. executive Fabrice Tourre, a lawyer said.
Paulson, the billionaire head of hedge fund Paulson & Co., will testify in the trial, John “Sean” Coffey, a lawyer for Tourre, told U.S. District Judge Katherine Forrest today in Manhattan federal court. Forrest said Paulson may take the stand Aug. 1.
The SEC sued Tourre and Goldman Sachs in 2010 over a transaction involving Abacus 2007-AC1, a synthetic collateralized debt obligation investors used to bet on mortgage bonds.
Paulson, a New-York based hedge fund, used the deal to bet against mortgage-backed securities. Investors on the other side of the bet lost more than $1 billion. Goldman Sachs, based in New York, paid a then-record $550 million to settle the case. Paulson and his firm, Goldman clients, weren’t sued.
CDOs are debt securities backed -- or collateralized -- by assets including pools of mortgage bonds and other asset-backed securities. A synthetic CDO, by contrast, doesn’t directly hold mortgage securities. It’s linked to the performance of such assets and allows investors to use credit default swaps to bet on their performance.
The case is SEC v. Tourre, 10-cv-03229, U.S. District Court, Southern District of New York (Manhattan).