Goldman Sachs is in talks over a potential settlement with an investor that claims that it lost money and went out of business after buying into a $1 billion mortgage-backed security that was later privately criticized by a senior executive at the Wall Street bank, the Financial Times said, quoting unnamed sources.

Basis Yield Alpha Fund, a hedge fund, seeks compensation over its $100 million investment in Timberwolf, a complex security.

Timberwolf plummeted in value months after it was launched in March 2007, at a time when Goldman had already decided to cut its exposure to the housing market.

The talks are at a preliminary stage and there is no certainty they will lead to a settlement, the report said.

But the news will compound pressure on Goldman after a grilling of former and current executives by a Senate panel and scrutiny of its activities in the mortgage market in the run-up to the financial crisis.

Goldman declined to comment on Timberwolf.

Goldman Sachs, which has been one of the firms to have emerged relatively unscathed from the financial crisis, is accused of dishonestly playing both sides of the market in selling a collateralized debt obligation. Specifically, it is accused of working with renowned hedge fund investor, John Paulson, who chose securities in the CDO that he wanted to short-sell, without telling this to investors who bought the CDO.

The affair has raised the issue of whether big banking groups can manage conflicts of interest. Goldman Sachs has a large wealth management operation. Wealth management firms have told this publication they expect to profit from Goldman’s woes on this matter.