Question

What was the issue of the fabulous fab scandal?

Answer 1

Tourre maybe better known by his nickname, "Fabulous Fab" is one of the few Wall Street individuals to stand trial in the wake of the financial crisis. The Securities and Exchange Commission said in 2007, Tourre misled investors by offering them an investment product linked to mortgage-backed securities which he knew were likely to fall in value. The securities were selected in consultation with Paulson & Co.a hedge fund that then bets against them. Tourre and Goldman, the SEC says, have not revealed to investors the role Paulson plays.

As the housing market collapsed, the mass failure of mortgage-related securities has long been seen as a key cause of the 2008 financial crisis.
Mr. Tourre, as Vice President of Goldman Sachs, put together a complicated financial product that was deliberately designed to maximize the likelihood of failure, and market and sell it to investors without adequate disclosure. "The SEC also charged Goldman Sachs (GS) with fraud in the same court case. Goldman settled for $550 million in 2010 without confirming or denying the accusation.

The SEC accused Tourre of hiding from investors how Paulson & Co, the multimillionaire John Paulson's hedge fund, had helped put Abacus together and bet it would fail It also accused Tourre of misleading ACA Capital Holdings Inc in thinking that Paulson would be an equity investor in the CDO rather than betting the other way as part of a massive wager against subprime mortgages.