Allstate Insurance (ALL: 25.73 -1.15%) sued Goldman Sachs (GS: 116.50 -2.21%) claiming the investment bank sold the company $123 million in toxic mortgage-backed securities, even though Goldman in its own terms considered the underlying collateral "junk" and "lemons."
In a suit filed in a New York state court, the insurance giant said Goldman "made numerous misrepresentations to Allstate regarding the features of the mortgage loans."
Allstate accused Goldman of not revealing the toxic and fragile nature of the underlying mortgages. The lawsuit alleges Goldman hid the risk of the securities because "it was able, through the process of securitization, to move the loans off of its books — and off the books of lenders who were indebted to Goldman."
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