Goldman Sachs is sued for $120m by ACA Financial Guaranty (ACA), a bond insurance company, over an investment that later went bad.

In its lawsuit ACA alleged that Goldman designed the investment, named Abacus, to fail so that a hedge-fund client, Paulson & Co, could take big profits by shorting the portfolio and so that Goldman could take in fat investment banking fees.

Bond insurer bought millions of dollars in Abacus notes and insured the super-senior parts of the underlying portfolio for $909m.

ACA said Goldman Sachs fraudulently induced it to take a long position in and provide guaranty insurance for Abacus. Goldman Sachs did so by deceiving ACA into believing that Paulson also was to be a long investor in Abacus.

In July, Goldman agreed to pay $550m to settle the SEC’s civil charges that it misled its clients in the sale of the mortgage securities.

Goldman also acknowledged that its marketing materials were incomplete, and it agreed in the settlement to reform its business practices.