Basis Capital's Basis Yield Alpha Fund, an Australian-based unit, said it lost around $56 million because of the collapse of Timberwolf, a collateralized debt obligation (CDO) product sold and underwritten by Goldman Sachs.
It is alleged that Goldman used the investment vehicle to get bad mortgages off its own books and then went on to bet on Timberwolf failing.
Eric Lewis, an attorney representing the hedge fund, said: "Goldman was pressuring investors to take the risk of toxic securities off its books with knowingly false sales pitches.
"Goldman should be called to account."
Basis invested $78 million in the investment vehicle in 2007 and said that it had been told by Goldman Sachs that the market for such securities had stabilized.
The CDO has been in the headlines recently after an email from a former executive at the bank, Thomas Montag, describing the sale of Timberwolf as "one s****y deal" was discovered by a Senate committee.
However, Daniel Sparks, the recipient of the email and the man who ran Goldman's mortgage department at the time, said when questioned about the matter that Mr Montag's comments had been a reference to his own performance in the transaction instead of a wider remark on the product itself.
The bank has denied the claims by Basis, describing the lawsuit as "a misguided attempt" by the hedge fund to shift its investment losses to Goldman Sachs.
Earlier this week, Goldman Sachs was attacked by Phil Angelides, chairman of the Financial Crisis Inquiry Commission.
He stated that it has been obstructing the progress of the inquiry and would now be issued with a subpoena compelling executives to appear for questioning and any requested documents to be provided, reported the Financial Times.
By Tony Aynsley