SEC looks into Deutsche Bank CDO shorted by Paulson

Deutsche Bank is facing an SEC investigation for its role in structuring a synthetic CDO, according to a report by Der Spiegel. The German publication states that the bank's actions in raising a CDO under its Start programme will come under question after it allegedly allowed hedge fund Paulson to select assets to go into the fund. The bank is then said to have neglected to have told investors about Paulson’s role in the transaction as well as concealing the fact that the hedge fund had taken a short position on the assets, allowing it to profit as the deal collapsed.

According to the article, Goldman Sachs settled a similar case with the SEC for $500 million regarding Goldman’s role in arranging an Abacus CDO.