Summary: Goldman sold a collection of subprime mortgages hand-picked by John Paulson. Paulson put together the portfolio specifically to bet against it. Goldman packaged it as a (synthetic) CDO and told investors it was put together by someone else (a specific someone else considered an expert in such matters). Paulson made a billion dollars when the mortgages went bad. The SEC is now calling Goldman a dirty liar.
It will be curious to watch this unfold, particularly as the paper trail hits the rating agencies.
