The Securities and Exchange Commission appears to be concluding its investigation of Magnetar, a hedge fund that played a pivotal role in the disastrous mortgage bond market that helped fuel the financial crisis. Citing anonymous sources, the Wall Street Journal reported this morning that SEC staff had decided not to recommend filing civil charges against the Illinois-based hedge fund.

The SEC declined to comment to ProPublica. Magnetar did not respond to requests for comment.

As we detailed in 2010, Magnetar worked with investment banks to build mortgage-backed securities called collateralized debt obligations – CDOs – that the hedge fund also bet against.

Magnetar would buy the riskiest part of the CDO, which gave it influence in picking which bonds would be included in the CDO. In turn, the hedge fund pushed bonds that would make the investment more likely to fail.

Magnetar has always denied that it had a strategy of betting against the deals it helped created. The hedge fund says it was “market neutral,” meaning it designed a deal where it would profit whether housing rose or fell.

In less than two years Magnetar helped create more than $40 billion worth of CDOs.

What made Magnetar an elusive candidate for enforcement action is that it never marketed these CDOs to outside investors. All it did was convince banks to construct the CDOs, for which the banks received millions in fees. The banks in turn sold the CDOs to investors who were not aware that a hedge fund was betting against deals it had helped create.

To date, most of the SEC’s enforcement over CDOs has focused primarily on banks. It appears those cases have still not concluded. In a recent securities filing, Bank of America revealed that it is still under investigation by the SEC over a CDO, created by Merrill Lynch, which Bank of America purchased in 2009.

As we have previously noted, Magnetar had a particularly active role in the creation of that CDO, called Norma. The hedge fund invested less than $50 million in Norma. Magnetar also placed a $600 million bet against the deal. Norma was initially worth $1.5 billion but collapsed, costing investors hundreds of millions of dollars. Magnetar has never disclosed what it made from the deal.