A pension fund suing Goldman Sachs (GS) for selling investors $698 million in high-risk, mortgage-backed securities obtained class-action status this week.
Class action allows multiple plaintiffs to pursue the same cause of action in court.
U.S. District Court Judge Harold Baer Jr. out of New York granted the lead plaintiff in the case, Public Employees' Retirement System of Mississippi, and similarly situation plaintiffs class-action status.
The Mississippi pension system filed the initial complaint, alleging Goldman's one-time offering of certificates backed by mortgages originated by New Century Financial led to deep losses within the public retirement fund.
Goldman Sachs declined to comment on the case Friday morning.
All of the mortgages tied to the transaction were originated in 2005.
In this case, class-action status applies to all persons or firms harmed by the purchase of certificates in Goldman's GSAMP Trust 2006-S2 offering.
The plaintiffs claim that the risky bonds were backed by fixed-rate, second-lien mortgages.
The retirement fund serving as lead plaintifs alleges New Century failed to follow its own underwriting guidelines and overstated the collateral value of the loans.
The plaintiffs further allege that Goldman Sachs failed to conduct adequate due diligence when selecting the loans for securitization.