The Libyan Investment Authority claims that Goldman Sachs made $350m – and cost the country over $1 billion – by tricking “naïve” staff into paying vastly over the odds for products that proved worthless.
The sovereign wealth fund, which was created to maximise oil profits and is worth $66 billion, bought complex derivatives from Goldman Sachs, which then collapsed in value in 2008, losing the Libyan Investment Authority $1 billion in the process.
Nine financial products were purchased in total, all of which were “bets” on the future share price of companies such as Citigroup and EDF. The fund says that its staff thought that they were buying actual shares in the companies and were duped by Goldman Sachs. However, the investment bank says that the argument is a case of “buyer’s remorse” and that the “financially sophisticated” bankers that made the purchase knew what they were getting.
The case has now gone before a high court judge who has ordered Goldman Sachs to reveal exactly how much money it made from the deal, and how these profits were calculated.
Roger Masefield QC, who is representing the Libyan investment fund said that Goldman Sachs had made “substantial and unusually high” profits on the deal, estimated to be around $350m. “We believe there was substantial overcharging … and they were taking advantage of my client’s naivety,” he said. Goldman Sachs claims that the focus on profits is irrelevant.
The trial has been set for the summer of 2016 and the fund has also launched separate legal action against France’s Société Générale, which it has accused of bribery.
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