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Goldman bars Americans from Facebook investment

January 17, 2011 | 11:30 am

Goldman Sachs is barring U.S. investors from its big investment in Facebook after the deal received massive public attention.

Goldman has already invested $450 million in Facebook and this month offered wealthy American clients an opportunity to put as much as $1.5 billion into the social networking site, which has not yet gone public.

The bank is now telling those clients that the deal is off.

“The decision not to proceed in the U.S. was based on the sole judgment of Goldman Sachs and was not required or requested by any other party,” the bank said in a statement. “We regret the consequences of this decision, but Goldman Sachs believes this is the most prudent path to take.”

The Facebook deal is what as known as a private placement, and American securities law demands that banks can solicit investors for such deals only in private.

Goldman did not publicly discuss the Facebook deal, but word of it leaked out and the bank eventually determined that the intense media coverage could potentially create legal problems if the deal went ahead.

The bank is still offering the investment to foreigners, who are not subject to the strict American securities law.

-- Nathaniel Popper