The SEC alleges that J.P. Morgan structured and marketed a synthetic collateralized debt obligation (CDO) without informing investors that a hedge fund helped select the assets in the CDO portfolio and had a short position in more than half of those assets. As a result, the hedge fund was poised to benefit if the CDO assets it was selecting for the portfolio defaulted.

In July 2010, Goldman Sachs [corporate website; JURIST news archive] agreed to a $550 million settlement [text, PDF] with the SEC to resolve charges [JURIST report] that they marketed a subprime mortgage product and made misleading statements and omissions to investors in early 2007. Of the $550 million settlement, $300 million will be paid to the US Treasury and $250 million will be distributed to harmed investors. The penalty was the largest against a financial company in SEC history. In May 2010, Lehman Brothers Holdings [corporate website] filed suit [complaint, PDF; JURIST report] against JPMorgan for allegedly "siphoning" off billions of dollars in "critically-needed" assets days before the investment bank filed for a record-breaking bankruptcy.