U.S. District Judge Victor Marrero dismissed a five-year class action lawsuit against Goldman Sachs (GS) over the sale of highly leveraged, subprime mortgage bonds that hedge fund Dodona I LLC said Goldman planned to bet against.
The federal judge granted summary judgment to Goldman, saying the hedge fund had not shown evidence Goldman could have known the bonds would fail.
The lawsuit, filed in September 2010, was filed against Goldman on behalf of investors in a $2 billion offering of two collateralized debt obligations, Hudson 1 and Hudson 2.
The hedge fund claimed that Goldman Sachs “recklessly or intentionally” sold the Hudson Mezzanine Funding CDOs to offload subprime risk on unsuspecting investors.
Goldman argued that the hedge fund leading the class action profited off the investments and that the lawsuit assumed “clairvoyance” on its part.
Goldman Sachs cited the case's expansive discovery which included 30 depositions and more than 1.5 million pages of documents, which showed no evidence to support the plaintiff’s claims.