Goldman Sachs reports substantial Q1 profits, as it continues to fight allegations of fraud.

US banking giant Goldman Sachs has reported net earnings for Q1 of $3.46 billion (£2.25bn), as it continues to fight allegations of fraud from the US Securities and Exchange Commission (SEC).

A quarterly highlight was the generation of $7.39bn in net revenue from Goldman’s Fixed Income, Currency and Commodities (FICC) products – 13% higher than the same period last year.

Net revenues in the firm’s investment banking sector were $1.18bn – 44% higher than the first quarter in 2009.

Lloyd C. Blankfein, Chairman and CEO of the bank, said: “Our performance in the first quarter reflects more signs of growth across the economy and the strength of our client franchise.

“While we are encouraged by growth prospects for the economy, we continue to put a premium on strong capital and liquidity levels, and disciplined risk management.”

Last week the SEC revealed that it had mounted charges against Goldman Sachs and one of the bank’s Vice Presidents – Fabrice Tourre – for allegedly defrauding investors by “miss-stating and omitting key facts about a financial product tied to subprime mortgages.”

The specialist subprime mortgages were linked with triggering the global economic crisis as banks had oversold the products to people who were unable to pay them off – forcing foreclosures across the States.

The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.

Robert Khuzami, Director of the Division of Enforcement: “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

The Financial Services Authority has announced today that following preliminary investigations it has decided to launch a formal enforcement investigation into Goldman Sachs following the SEC’s allegations.

On receipt of the charges Goldman Sachs refuted the allegations protesting that a number of significant points had been omitted by the SEC.

In today’s Q1 earnings report Blankfein acknowledged the untimely situation thanking those who are standing by the firm, but refusing to comment further: “In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people.”