Fabrice Tourre, a French-born Stanford graduate, became the face of Wall Street greed after he once joked about selling toxic mortgage assets to "widows and orphans".
He was accused of misleading institutional investors about subprime mortgage securities that he knew were doomed to fail.
This set the stage for a valued Goldman hedge fund client, Paulson & Co. Inc., to secretly bet against the investment.
The manoeuvre ended up making $1bn for the hedge fund and its wealthy president, John A Paulson, and millions of dollars in fees for Goldman.
Tourre worked as a trader at Goldman Sachs Thursday’s verdict at the civil trial in Manhattan federal court represents the most high-profile legal action by the Securities and Exchange Commission (SEC) related to the subprime meltdown.
The 34-year-old was found liable in six of seven SEC fraud and other claims and faces potential fines and a possible ban from the financial industry.
The SEC also sought to show that it helped earn Tourre a bonus that boosted his salary to $1.7m in 2007.
In closing arguments, Martens called Tourre's testimony "surreal, imaginary, unreal, dream-like" and told jurors that the defendant wanted them "to live in his imaginary land ... to live in a fantasy world."
"Only if you close your eyes to the facts, you can find Mr Tourre not liable for his actions," the SEC lawyer said.
Tourre's lawyer, John Coffey, countered that the government had "unjustly accused him of wrongdoing".
Mr Coffey urged jurors to put the investment's failure in perspective, noting that all similarly packaged securities "went off the cliff as well" after 2007.
Some of the evidence focused on a personal email Tourre sent to his girlfriend in France.
The SEC lawyers said it proved the hubris of a man at the centre of a massive fraud, while the defence claimed it was "an old-fashioned love letter" penned by a young trader who was full of self-doubt and angst over upheaval in the financial world.
Writing in French, Tourre said of the financial markets: "The whole building is about to collapse any time now."
"Only potential survivor, the fabulous Fab ... Standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!"
Pressed by Marten on what he meant, Tourre said, "I didn't create any monstrosities."
Goldman settled with the SEC in 2010 by paying a $550m fine without admitting or denying wrongdoing.
Tourre left the firm in 2012 and is studying for his doctorate in economics at the University of Chicago.
A former SEC enforcement lawyer, Jacob Frenkel said that although Tourre was a "small player", the outcome marked an important victory for federal regulators.
He said: "The SEC had a lot at stake in this case. This validates the SEC's high-risk gambit to take on Goldman Sachs in connection with this transaction."
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