The United States' investment bank Goldman Sachs, and one of its senior managers, have been charged with fraud.

The US Securities and Exchange Commission (SEC) says the bank withheld information in the sale of a sub-prime mortgage product allegedly designed to fail. The SEC alleges that Goldman Sachs did not tell investors that a major hedge fund, Paulson & Co., was speculating the mortgage-backed securities in the hope that they would fall in value. It also alleges that the bank did not tell investors that Paulson & Co. was involved in the construction of the product, known as ABACUS. The drop in value cost investors more than one billion dollars.

The SEC charges caused shock waves on Wall Street on Friday. Shares in Goldman Sachs dropped more than ten percent when the news was announced.