Goldman Sachs sued over Paulson non-disclosure

This article details the current lawsuit against Goldman-Sachs by the SEC over allegations that Goldman defrauded two clients by not disclosing John Paulson was betting the mortgages would fail. These allegations involve a derivative market set up to bet for and against the success of sub prime mortgages that many prominent brokerage firms became involved in. Paulson heads an investment firm that bet the mortgages would fail, and they in fact did. This fallout led to massive economic problems including bailouts of prominent investment firms. The firms believed the mortgages were diversified enough that they would not fail. Goldman-Sachs also lost money in the deal. Paulson made a significant amount of money. This led to the Wall street has run amok comments from politicians, and attempts to now reform bank lending practices. I think since Goldman bet the wrong side thinking Paulson was wrong it is hard to claim they defrauded investors.