The German government is considering legal action in a case in which financial firm Goldman Sachs is accused of defrauding investors, a newspaper reported Saturday.

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Goldman Sachs CEO Lloyd Blankfein's firm has been charged with civil fraud in the U.S. ((Pablo Martinez Monsivais/Associated Press))

The U.S. government alleges Goldman Sachs sold mortgage-backed investments without telling buyers they were crafted with input from a hedge-fund client who was betting on them failing.

Buyers included German bank IKB Deutsche Industriebank AG — an early victim of the recent financial crisis that was rescued by the state-owned KfW development bank, among others.

The Berlin-based Welt am Sonntag newspaper quoted Chancellor Angela Merkel's spokesman, UIrich Wilhelm, as saying that German regulator BaFin will ask the U.S. Securities and Exchange Commission for information.

"After a careful evaluation of the documents, we will examine legal steps," he said, according to the report.

There was no immediate confirmation from the government.

The SEC says IKB lost nearly all its $150 million stake. IKB issued a profit warning in 2007, saying it had been hurt by U.S. subprime mortgage investments. IKB was sold in 2008 to Dallas-based Lone Star Funds.

The U.S. civil fraud case against Goldman Sachs is the American government's most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge much of the world into recession.