Securities Cases: Goldman Sachs Investors Can Proceed with $13B CDO Fraud Litigation, Deutsche Bank Resolves Self-Dealing Lawsuit for $21.9M, and Elkhorn Capital Group Founder is Accused in $2.5M ETF Fraud


Shareholders Can Proceed with $13B CDO Fraud Case Against Goldman Sachs

A US district court judge has given Goldman Sachs (GS) shareholders the right to move forward with their $13B collateralized debt obligation fraud lawsuit accusing the bank of not disclosing certain conflicts of interest. Judge Paul A. Crotty granted the investors’ case class action certification.

The CDO fraud lawsuit revolves around investments that Goldman Sachs created and sold prior to the collapse of the housing market. According to the plaintiffs, the bank made false and misleading statements and acted counter to clients’ best interests.

One of the more infamous Goldman collateralized debt obligations was the Abacus CDO, which resulted in the bank settling a related Securities and Exchange Commission case for $550M over allegations that it misled investors about the subprime mortgage product. Ex-Goldman Sachs VP Fabrice Tourre was ordered by a jury to pay $825K for his involvement in the Abacus debacle.

The plaintiffs of this class action CDO case, including the Arkansas Teachers Retirement System, the West Virginia Management Board, the Plumbers and Pipefitters Pension Group, and others, were granted the right to collectively sue Goldman Sachs in 2015. However, an appeals court reversed that decision.

Deutsche Bank to Pay 401(K) Self-Dealing Lawsuit

In one of the largest settlements reached involving a financial service company named in a 401(K) self-dealing case, Deutsche Bank (DB) will pay $21.9M to settle allegations that it engaged in self-dealing at the expense of employees. According to the complaint, originally brought in 2015, the firm made money off employees’ retirement money through the high-cost funds that Deutsche Bank and its affiliates oversaw in the 401K plan.

Thousands of Deutsche Bank workers were purportedly affected.

The plan participants contend that the bank put their retirement money into proprietary funds that came with excessive fees. The plaintiffs believe that Deutsche Bank violated its fiduciary obligations under the Employee Retirement Income Security Act (ERISA)

A few of the other companies that have settled similar 401(K) self-dealing allegations include Citigroup (C), which settled for $6.9M, American Airlines for $22M, and Allianz for $12M. Now, about 34,700 people will get relief as part of the  ERISA settlement with Deutsche Bank, which a court must still approve.

ETF Fraud Lawsuit Seek Damages from Elkhorn Capital Group Founder

Keystone Associates LLC and Mountain Partners LLC, two companies based in Utah, are now suing ex-Elkhorn Capital Group CEO and founder Benjamin Fulton for fraud. According to the plaintiffs,  Fulton and his company misled them when they allegedly made false claims that Barclays (BARC) gave Elkhorn $5M to sell exchange-traded products while not telling them that there was no guarantee that the funding would happen. The two companies contend that Barclays supposed relationship with Elkhorn was key in their decision to invest in the company.

For example, Keystone bought $1M in Elkhorn stock in 2016 and gave the financial firm a $500K loan last year in return for a promissory note that was supposed to potentially become equity. Meantime, Cable Mountain gave a $1M loan also for a convertible promissory note.

When Elkhorn ended up not being able to sell enough funds and became insolvent, both companies’ equity lost their value. The plaintiffs contend that this caused them to sustain $2.5M in losses.

They are accusing Fulton of founding Elkhorn because he knew that investors would not back just one person. They want a jury trial so that they can fight for damages and legal fees.

Meantime, Fulton is now the managing director of ProShares, which provides ETFs.

If you are an investor that has lost money because of fraud, contact our securities lawyers today. Our investor law firm has helped thousands in recouping their investment losses. Shepherd Smith Edwards and Kantas, LLP represent investors throughout the US.

Goldman Sachs investors win right to sue as group over CDOs, Pension & Investments, August 15, 2018

Exchange-Traded Fund Pioneer Faces $2.5M Fraud Lawsuit, Law360, August 14, 2018

More Blog Posts from SSEK Law Firm:

Ameriprise Financial to Pay $4.5M Over Alleged Failure to Protect Investors From Thieving Representatives, August 15, 2018

Securities Fraud Allegations Against Former Merrill Lynch/RBC Financial Adviser Could Lead to More Unauthorized Trading and Failure to Supervise Claims, August 14, 2018

Platinum Partners Principal Pleads Guilty to Fraud, May 23, 2018

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