Fresh allegations have emerged against Goldman Sachs as the Wall Street banking and wealth management titan fights to protect its reputation after a scandal surrounding its actions as a seller of mortgage securities products.

The Financial Times – citing four unnamed sources – said that the firm was both an underwriter and an investor in Lloyds Banking Group’s large refinancing deal late last year. (Lloyds is partly owned by the UK government due to a bailout).

Goldman – a dealer manager on the debt portion of the £23.5 billion (around $36 billion) transaction - demanded last-minute changes to the structure of a deal it was underwriting. This had the effect of benefiting its position as a bond investor.

The firm’s bankers said that its Chinese walls bar underwriters from knowing anything about the investment activity of its proprietary traders and say the exposure of the affair reveals rivals’ opportunism in besmirching its reputation.

Goldman is fighting fraud charges brought by the Securities and Exchange Commission that it dishonestly played both sides of the market in selling collateralized debt obligations to investors while simultaneously involving renowned hedge fund investor John Paulson in choosing securities in the deal that Paulson intended to short-sell.

The CDO alleged fraud and the latest allegation highlights the issue of whether financial groups which undertake investment banking operations can effectively manage conflicts of interest which – as some bankers argue – are inevitable features of complex market transactions.

Lloyd Blankfein, Goldman’s chief executive, is reportedly due to testify to Congress on the issue. Meanwhile, lawyers have told this publication that a wave of lawsuits can be expected against Goldman Sachs from investors trying to win compensation if they have suffered losses on products involving the Wall Street firm.

Goldman Sachs has a large wealth management operation focused on ultra high net worth investors. The firm has declined to comment about its activities or strategy in this area when contacted by WealthBriefing in the past.