Goldman Sachs Is Being Sued for 27 Separate Stock Offerings It Underwrote
g at xny.io
Tue Feb 28 06:48:22 PST 2023
By Pam Martens and Russ Martens: February 28, 2023 ~
David Solomon, Chairman and CEO, Goldman Sachs
David Solomon, Chairman and CEO, Goldman Sachs
As we reported on February 7, there are some very strange things going on
at Goldman Sachs.
After reading the Wall Street investment bank’s annual report, which was
filed with the Securities and Exchange Commission last Friday, the word
“strange” doesn’t seem to do justice to the situation. Goldman Sachs is
looking more like a litigation warehouse these days than an investment bank.
According to Goldman’s annual report, it is being investigated for pretty
much everything it does to make money: derivatives, currencies, mortgages,
financial advisory, securities lending, dark pools, investment management,
commodities, U.S. Treasuries, corporate bonds, credit cards, hiring and
compensation practices, research practices, compliance with the Foreign
Corrupt Practices Act, transactions involving government-related financings
– and on and on.
Things are so bad that it concedes in this annual report that it may have
under-reserved for its legal costs by $2.3 billion. That’s a pretty big
number to fail to anticipate – especially when your Chairman and CEO, David
Solomon, has a side hustle as a DJ at tiki bars.
Particularly unnerving is the revelation that Goldman Sachs is being sued
for its work as one of the underwriters of 27 separate share offerings,
many of which have declined dramatically in share price. (The lawsuits
actually total 28 but we have not included the lawsuit involving Waterdrop
Inc. as Goldman Sachs reports it was dismissed by the U.S. District Court
for the Southern District of New York on February 3.)
The lawsuits involve the following stocks, listed in the order that they
appear in the Goldman Sachs annual report. We have added ticker symbols in
parenthesis following the company name.
Uber Technologies, Inc. (UBER); GoHealth, Inc. (GOCO); Array Technologies,
Inc. (ARRY); ContextLogic Inc. (WISH); DiDi Global Inc. (DIDIY); Vroom Inc.
(VRM); Zymergen Inc. (acquired by Ginkgo Bioworks); Sea Limited (SE);
Rivian Automotive Inc. (RIVN); Natera Inc. (NTRA); Robinhood Markets, Inc.
(HOOD); ON24, Inc. (ONTF); Riskified Ltd. (RSKD); Oscar Health, Inc.
(OSCR); Oak Street Health, Inc. (OSH); Reata Pharmaceuticals, Inc. (RETA);
Bright Health Group, Inc. (BHG); 17 Education & Technology Group, Inc.
(YQ); LifeStance Health Group, Inc. (LFST); MINISO Group Holding Limited
(MNSO); Coupang, Inc. (CPNG); Yatsen Holding Ltd. (YSG); Rent the Runway,
Inc. (RENT); Opendoor Technologies Inc. (OPEN); FIGS, Inc. (FIGS);
Silvergate Capital Corporation (SI); Centessa Pharmaceuticals plc (CNTA).
Five of these companies’ share prices have declined from 75 percent to 90
percent over the past year. (See chart below.)
All of this negative news comes a little more than two years after Goldman
Sachs and a subsidiary were criminally charged by the U.S. Department of
Justice in the looting and bribery scandal known as 1MDB – the largest
scandal in the firm’s history. Goldman Sachs admitted to the charges and
had to pay over $2.9 billion. There have been plenty of other warning signs
over the past decade that Goldman Sachs was on the wrong track with its
In 2018 former New York Fed bank examiner, Carmen Segarra, released her
book, Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street.
The main giant Segarra was exposing was Goldman Sachs and its enshrined
conflicts of interest. When Segarra wanted to write a negative examination
of what she found at Goldman Sachs, she was fired by her crony bosses at
the New York Fed.
An earlier book was penned in 2012 by a former Vice President at Goldman
Sachs. In Why I Left Goldman Sachs: A Wall Street Story, Greg Smith exposes
a culture of ripping off clients. In tandem with the book launch, Smith
explained this culture to the approximate 13 million viewers of 60 Minutes.
Greg Smith is the Goldman Sachs VP who tendered his resignation after 12
years with the firm on March 14, 2012 via the OpEd page of the New York
Times, famously lamenting “how callously people talk about ripping their
clients off. Over the last 12 months I have seen five different managing
directors refer to their own clients as ‘muppets.’ ”
On April 16, 2010, two years before Greg Smith made his charges, the
Securities and Exchange Commission made the identical charge: Goldman was
ripping off its clients. Here’s the actual wording of the complaint:
“Undisclosed in the marketing materials and unbeknownst to investors, a
large hedge fund, Paulson & Co. Inc…played a significant role in the
portfolio selection process. After participating in the selection of the
reference portfolio, Paulson effectively shorted the RMBS [Residential
Mortgage Backed Securities] portfolio it helped select by entering into
credit default swaps (‘CDS’) with GS&Co [Goldman Sachs & Company] to buy
protection on specific layers of the ABACUS 2007-AC1 capital structure.
Given its financial short interest, Paulson had an economic incentive to
choose RMBS that it expected to experience credit events in the near
future. GS&Co did not disclose Paulson’s adverse economic interests or its
role in the portfolio selection process in the term sheet, flip book,
offering memorandum or other marketing materials provided to investors.”
To put all that in plain English, the SEC charged Goldman Sachs with
knowingly creating an investment product designed to fail so that a hedge
fund manager could benefit by shorting it and then sold it to its clients
as a good investment. Goldman settled that complaint for $550 million, at
that time the largest penalty ever imposed by the SEC on a Wall Street firm.
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