The banking giants stock price was down more than 8 per cent in New York trading after Bloomberg News reported late Thursday that federal prosecutors in New York were looking into filing fraud charges.

Goldman already faces a civil fraud suit filed earlier this month by the Securities and Exchange Commission. The US regulator charges that Goldman misled clients, colluding with a hedge fund to bet against mortgage products that were sold as a good deal to other investors.

Goldman Sachs chief executive Lloyd Blankfein was forced to defend the banks conduct during a testy Senate hearing earlier this week. He denied that the investment bank misled investors or profited from the collapse of the US sub-prime housing market.

Blankfein defended the firms practice as prudent decision-making to protect its interests and said it did not excessively engage in short betting against its own mortgage security products.