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GFC 2007 crisis -- Shorting the CDOs by Hedge fund Management Magnetar

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"The people who created and dealt CDOs
Once mortgages had been bundled into mortgage-backed securities, other bankers took groups of them and bundled them together into new financial products called Collateralized Debt Obligations. CDOs are composed of tiers with different levels of risk. As we’ve reported, a hedge fund named Magnetar worked with banks to fill CDOs with the riskiest possible materials, then used credit default swaps to bet that they would fail. Magnetar says that the majority of its short positions were against CDOs it didn’t own. Magnetar also says it didn’t choose what went its own CDOs, though people involved in the deals who spoke to ProPublica contradict this account."

I was reading an article on the role of CDOs in 2008 GFC crisis online and how they have been used to ones advantage. But I think its a fraud from the part of this hedge fund and the Bank involved in securitization ? Am I right? I guess AIG is on the long side of the transaction, or it can be anybody ..

Original Ref :
https://www.propublica.org/article/...ed-to-the-big-players-in-the-financial-crisis
 
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