Paulson and Co has sought the dismissal of the lawsuit that alleged the firm conspired with Goldman Sachs Group Inc to entrap the bond insurer to guarantee payments for an investment scheme that is designed fail. Paulson in its court filings alleged 'it made no misrepresentations' to ACA Financial Guarantee about the collateralization of the debt obligations named Abacus.
ACA had sued Goldman for US$120 million back in 2011 and added Paulson and its hedge fund subsidiary Paulson Credit Opportunities Master II Ltd into the suit. The amendment included the alleged deception committed by the parties in making it look that Paulson was investing in Abacus. Instead, Paulson made a short position investment in Abacus.
Paulson said in its filed pleadings, "By its nature, a synthetic CDO like Abacus must have a long and a short. Paulson entered into a credit default swap with Goldman to take a short position on it. Paulson's obligations ended there."
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