'Fabulous Fab' faces hefty fine and ban

Fabrice Tourre, the former Goldman Sachs banker, has been found liable for his role in a massive mortgage securities fraud that cost investors $US1 billion.

"Fabulous Fab", as he calls himself, was found liable by a nine-member jury for six of the seven charges against him. He now faces potential fines and a possible ban from the financial industry.

The 34-year-old, who had denied wrongdoing, was sued by the US Securities and Exchange Commission in the highest-profile trial resulting from the financial crisis.

The SEC described Tourre as the "face of Wall Street greed" and claimed he hoodwinked investors into ploughing money into a sub-prime mortgage vehicle called Abacus while he was at Goldman.

The SEC claimed Tourre and hedge fund Paulson & Co conspired to hook buyers by suggesting that founder John Paulson was also backing the vehicle, on the assumption that house prices would rise. In fact, Mr Paulson had taken a short position, betting that prices would fall. The manoeuvre ended up making $US1 billion for the fund.

The SEC also sought to show that the scheme helped earn Tourre a bonus that boosted his salary to $US1.7 million in 2007.

Goldman settled with the SEC to the tune of $US550 million without admitting or denying wrongdoing to avoid a trial, but has covered Tourre's legal fees despite him leaving last year. Goldman said: "As a firm we remain focused on being more transparent, more accountable and more responsive to the needs of our clients."

Andrew Ceresney, the SEC's co-director of enforcement, said: "We will continue to vigorously seek to hold accountable, and bring to trial when necessary, those who commit fraud on Wall Street.

"Mr Tourre put together a complicated financial product that was secretly designed to maximise the likelihood that it would fail, and marketed and sold it to investors without appropriate disclosure,"

US District Judge Katherine Forrest instructed both sides to submit proposals by August 23 for what she termed "next steps". The judge will determine any financial penalties for Tourre.