On April 16, 2010, the U.S. Securities & Exchange Commission charged Goldman, Sachs & Co. and Fabrice Tourre, a vice president on leave from Goldman, with committing fraud in the structuring and marketing of a synthetic collateralized debt obligation (CDO) linked to subprime mortgages.  See “SEC Charges Goldman, Sachs & Co. and a Goldman V.P. with Securities Fraud; Hedge Fund Manager Paulson & Co. Named in Complaint, But Not Charged with Any Violation of Law or Regulation,” Hedge Fund Law Report, Vol. 3, No. 15 (Apr. 16, 2010).  The SEC alleges that one of the world’s largest hedge fund managers, Paulson & Co., paid Goldman to create the CDO, participated in the process of selecting subprime residential mortgage-backed securities (RMBS) to be referenced by the instruments in the CDO and then entered into a credit default swap transaction with Goldman to buy protection from credit events on specific layers of the CDO.  According to the SEC, Paulson did not violate federal securities law in its actions, but Goldman did when it thereafter failed to disclose to investors that Paulson had played a key role in developing the financial product when Paulson also had an investment that would increase in value if the CDO decreased in value.  The case represents the latest in a series of SEC enforcement actions seeking to hold firms accountable for their alleged roles in the financial crisis.  As the SEC alleged in its complaint filed in U.S. District Court for the Southern District of New York, Goldman’s actions “contributed to the recent financial crisis by magnifying losses associated with the downturn in the United States housing market.”  This article provides a detailed recitation of the key factual and legal allegations in the SEC’s complaint, and outlines Goldman’s preliminary response.