As you may have heard, Goldman Sachs is being sued for fraud by the Securities and Exchange Commission for allegedly misleading investors about a deal that Goldman helped structure and sell. In the civil suit, the SEC specifically faulted Goldman for failing to disclose that a hedge fund was helping create the investment while betting big the deal would fail. 
 
 According to the SEC, Goldman Sachs knew about the hedge fund’s bets, knew it played a significant role in choosing the assets in the portfolio, and yet did not tell investors about it. (Goldman Sachs has called the SEC’s accusations “completely unfounded in law and fact.” And in another more detailed statement, it said it “did not structure a portfolio that was designed to lose money.”) 
 
 As we reported at ProPublica last week, many other major investment banks were doing a similar thing. 
 
 Investment banks including JPMorgan Chase, Merrill Lynch (now part of Bank of America), Citigroup, Deutsche Bank and UBS also created CDOs that a hedge fund named Magnetar was both helping create and betting would fail. (Update 4/17: Magnetar denies it was making such bets.) Those investment banks marketed and sold the CDOs to investors without disclosing Magnetar’s role or the hedge fund’s interests. 
 
 Here is a list of the banks that were involved in Magnetar deals, along with links to many of the prospectuses on the deals, which skip over Magnetar’s role. In all, investment banks created at least 30 CDOs with Magnetar, worth roughly $40 billion overall. Goldman’s 25 Abacus CDOs—one of which is the basis of the SEC’s lawsuit—amounted to $10.9 billion. 
 
 Our reporter Jake Bernstein explained the investment banks’ disclosure failures on Chicago Public Radio’s “This American Life”: 
 
 The role of Magnetar, both as equity investor and in their bets against the very CDOs they helped create, were not disclosed in any way to investors in the written documents about the deals. Not the marketing materials, not the prospectuses, not in the hundreds of pages that an investor could get to see information about the deal was it disclosed that it was in fact Magnetar who’d helped create the deal, and who’d bet against. 
 
 That is, of course, along the lines of what the SEC is suing Goldman Sachs for now. The SEC’s suit also says CDOs like the ones Goldman built “contributed to the recent financial crisis by magnifying losses associated with the downturn in the United States housing market.” 
 
 Notably, the SEC did not sue the hedge fund involved in Goldman’s Abacus deals—Paulson & Co.—or its manager, John Paulson. Instead, it’s going after Goldman. And as we pointed out in our reporting, there’s no evidence that what Magentar did was illegal. 
 
 We’ve called the major banks involved in Magnetar CDO deals to see if they were concerned about similar lawsuits. Thus far, Bank of America, Citigroup, Deutsche, Wells Fargo (which bought Wachovia) and UBS have responded and have all declined our requests for comment. Here is Magnetar’s response to our original reporting. 
 
 Read ProPublica’s full Magnetar story. 
 
 ProPublica’s Ryan Knutson contributed to this report. ||||| For months, Goldman Sachs and the Securities and Exchange Commission had been involved in secret talks over allegations that the Wall Street bank defrauded customers in selling them investments designed to fail. 
 
 Then, after a crucial meeting last month between lawyers for Goldman and the SEC, the agency came to a fork in the road. Even after SEC lawyers had told Goldman in writing they were prepared to file a federal suit, the firm gave no ground, declining to ask for a settlement, according to three people familiar with the case. The agency could prolong negotiations in hopes of reaching a deal Goldman would accept, as the SEC had often done in previous cases, or take the bank to court. 
 
 Endorsing the recommendation of investigators, the SEC's five-member commission voted 3 to 2 to proceed with the civil suit, taking a high-stakes gamble that pits Wall Street's top regulator against its most storied bank. The case, filed Friday, 
 
 has provoked a counteroffensive from Goldman, which says it was blindsided by the suit. Goldman's defenders are suggesting that the suit may have been designed to help make the case for the Obama administration's push this month for legislation to overhaul financial regulation. 
 
 SEC officials say that they told Goldman last summer the agency would probably bring action, and that the bank did not show any contrition. At the same time, they say they wanted to use the Goldman case to make a broader statement about the agency's renewed intention of holding prominent financial firms accountable for misconduct. 
 
 Neither SEC officials nor Goldman executives would discuss the internal dynamics of the case on the record. But people in both camps were preparing Monday for an epic court battle that could offer a chance for both sides to restore their reputations after they were sullied during the financial crisis. 
 
 Victory for the SEC, Wall Street's top regulator, would help restore credibility after it was sharply criticized for not aggressively enforcing securities laws. Victory for Goldman could help the firm answer critics who allege it epitomized the excesses that led the financial sector into its worst crisis in decades. 
 
 On Monday, the case reverberated around the world. Financial regulators in London and Germany said they would open investigations to see if Goldman's sale of mortgage securities broke local laws. 
 
 Goldman's domestic legal troubles could be compounded abroad as foreign regulators open probes into the investment. London's Financial Services Authority and Germany's BaFin regulatory agency said Monday that they were coordinating with the SEC. The Royal Bank of Scotland lost an estimated $850 million and the Duesseldorf-based IKB Deutsche-Industriebank lost more than $100 million on mortgage-related securities set up by Goldman. [Story, A7.] 
 
 The SEC's suit centers on a development central to the financial crisis: the creation of exotic investments that allowed firms to bet on the direction of the housing market. 
 
 The suit asserts that Goldman defrauded investors when it sold them a subprime-mortgage investment in 2007 that was secretly designed to lose value. The agency alleges that Goldman created and marketed the investment without telling its clients that Paulson & Co., a prominent hedge fund, had helped the bank assemble the investment while at the same time was placing bets that it would lose value. The bank received $15 million from Paulson & Co. for its services. 
 
 Goldman has denied the allegations, releasing three statements since Friday rebutting the SEC's points.
– The SEC's fraud suit against Goldman Sachs might be just the tip of the iceberg, because other investment banks engaged in exactly the same sleight of hand, Pro Publica reports. Goldman is accused of failing to disclose that a hedge fund was both helping to create, and betting against, the investments Goldman was selling. But several other investment banks, including JPMorgan Chase, Merrill Lynch and Citigroup all did the same thing. The SEC is already investigating some of these other deals, the Wall Street Journal adds. The agency says it'll sue if it believes banks misrepresented securities to their clients. Indeed, Rabobank already sued Merrill Lynch last year, alleging that Merrill did just that with some securities that the hedge fund Magnetar helped create and bet against. When the Goldman case came out, Rabobank issued a statement saying it was “the same type of fraudulent conduct” Merrill had engaged in.