Sources close to the matter told The Wall Street Journal that SEC will sue Mizuho Financial Group and former employee Alexander Rekeda in the CDO case.
As per the charges levied by the SEC, the mortgage-bond deal was assembled by Rekeda and underwritten and sold by the Japanese bank, resulting in the fund losing its capital within a few months.
The collateralized debt obligation was a pool of subprime mortgages or other loans, and the Japanese lender did not inform investors that a hedge fund was betting that some of the subprime loans and other assets bundled together in the CDO would decline in value.
A collateralized debt obligation, or CDO, is a type of derivative product whose value and payments are derived from an underlying portfolio, often bonds or mortgages.
