Has Goldman Sachs experienced its Icarus moment of flying too close to the sun? The investment bank appeared, to the envy of its rivals, to have flourished amid the chaos of the global financial crisis, but has it been a bit too clever?

That could be one way of looking at the basis of the securities fraud case that the US regulator, the Securities and Exchange Commission, is bringing against Goldman Sachs.

Not only did Goldmans legitimately make money when the subprime mortgage market collapsed, but the SEC alleges that it also worked with a hedge fund on a collateralised debt obligation (CDO) vehicle that was sold to some of  Goldmans’ clients, while the hedge fund bet against the subprime mortgage market.

The charges are extremely damaging to the investment bank and it has vowed to fight them. But it is now at the centre of a political firestorm, as the politicians have seized upon the case as evidence of the need for financial reform.

In the US, President Obama is under pressure to show he can deal with Wall Street and a stream of US senators have jumped onto the bandwagon of Main Street populism versus Wall Street elitism with reform proposals.

Similarly, in the UK, prime minister Gordon Brown, in the middle of an election campaign, has called Goldmans “morally bankrupt” and there are calls for it be to excluded from future government appointments for advice and other services.

Emotions are running high and have been stoked up by the fact that RBS, which collapsed and had to be rescued by the taxpayer, lost over £500m in the allegedly fraudulent transaction. As a result, RBS has been described as watching events closely.

While the details of the SEC’s case are complex, the attention and negative press is bound to be harmful to Goldmans’ reputation. And this case might also lead to other cases against other institutions, or even to class action cases from unhappy investors who feel they lost out and now have someone to blame.

Over the next few months and possibly years, it will be fascinating to see how this case develops and what it means to Goldman Sachs.

In ancient Greek mythology, Icarus’s flight took him too close to the sun, with fatal results.

Goldman Sachs will be hoping its rise and rise in recent years has not taken it too close to forces that could bring it down, or at least damage its standing. But even if it wins the legal battle, it might find it has won a pyrrhic victory.