Justice Dept. Said to Open Goldman Inquiry

Federal prosecutors have opened an investigation into trading at Goldman Sachs, raising the possibility of criminal charges against the Wall Street giant, according to people familiar with the matter.

While the investigation is still in a preliminary stage, the move could escalate the legal troubles swirling around Goldman.

The Securities and Exchange Commission, which two weeks ago filed a civil fraud suit against Goldman, referred its investigation to prosecutors for the Southern District of New York, which has now opened its own inquiry.

Goldman has vigorously denied the accusations by the S.E.C., which accused Goldman of defrauding investors involved a complex mortgage deal known as Abacus 2007-AC1.

Federal prosecutors would face a higher bar in bringing a criminal case against Goldman, whose role in the mortgage market came under sharp scrutiny this week during a marathon hearing in the Senate.

The stakes are high for Goldman, but they are also high for the United States attorney’s office. Prosecutors there lost a case last year filed against two hedge fund managers at Bear Stearns, whose collapse presaged the turmoil to come on Wall Street.

Prosecutors built much of that case around internal e-mail messages at Bear Stearns, much the way the S.E.C. and senators have pointed to e-mail at Goldman in which employees disparaged investments that they were selling to their customers.

In the end, however, prosecutors were unable to prove any criminal wrongdoing by Bear Stearns.

A spokesman for Goldman declined to say whether the bank knows about a criminal case, but he said “given the recent focus on the firm, we’re not surprised” to learn about a criminal inquiry. The spokesman said Goldman would cooperate with any investigators’ requests for information.

A spokeswoman for the Southern District also declined to comment.

Goldman has said it will defend itself against the S.E.C.’s accusations. The firm’s executives discussed the case last week during their quarterly earnings call, and this week, they testified about their mortgage operations in a nearly 11-hour hearing in Washington.

That hearing focused broadly on Goldman’s mortgage operations, and the Senate committee released reams of new internal documents from Goldman. The committee is looking into many other mortgage deals beyond the one cited by the S.E.C.

The deal at the heart of the S.E.C. case was one of 25 mortgage securities that Goldman created in a program it called Abacus.

Those securities were synthetic collateralized debt obligations, which are bundles of derivatives that mimic the performance of mortgage bonds. The securities allowed people who believed the housing market would collapse to buy insurance against certain mortgage bonds they thought might fail. When those mortgage bonds hit trouble, the investors in the Abacus deals suffered major losses.

The Abacus deals were, however, very profitable for the parties that were negative on housing. In the Abacus 2007-AC1 deal, the hedge fund manager John Paulson raked in about $1 billion when the bonds he helped select hit trouble.

Mr. Paulson has not been named in the S.E.C.’s case because he was not involved in marketing and selling the deal.