Tag Archives: Collateralized debt obligation

SEC’s Hunt for Crisis-Era Wrongdoing Loses Steam

SEC’s Hunt for Crisis-Era Wrongdoing Loses Steam

Securities and Exchange Commission enforcement officials have decided not to recommend filing civil charges against hedge-fund firm Magnetar Capital LLC, which teamed up with Wall Street firms to create mortgage securities that suffered billions of dollars in losses during the financial crisis, according to people familiar with the situation.

The decision is a sign the SEC’s investigations into whether companies or individuals broke the law with their conduct ahead of the crisis are running out of gas. Despite last week’s courtroom victory in a civil trial against former Goldman Sachs Group Inc.GS -1.13% trader Fabrice Tourre over his role in a deal called Abacus 2007-AC1, securities regulators are quietly winding down some of their highest-profile investigations related to the crisis, these people said.

Magnetar is an Illinois hedge-fund firm that was started in 2005 and named after a type of neutron star, a remnant of a collapsed sun. The firm worked closely with some of the biggest banks and securities firms to create dozens of mortgage-bond deals called collateralized debt obligations.

The securities were linked to pools of mortgages and other debts and sold in slices of varying risk and return. Magnetar helped fuel the CDO machine by purchasing the riskiest portions of certain deals while at the same time betting some CDOs would decline in value.

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