John Cassidy over at The New Yorker has a great summary of the story, as well as a castigation of the GS senior management. Highly recommended. The best quote and summary of the situation is this:
The fact remains that Goldman, in attempting to set up a quasi-public market for Facebook’s stock prior to an I.P.O., is, to put it kindly, stretching the securities laws to their limit.
Smart People I Know 