Goldman Accused Over ‘Unsuitable’ Derivatives Trades

The $66 billion Libyan Investment Authority (LIA) is seeking more than $1 billion from Goldman Sachs, which it allegedly lost through derivatives transactions during the financial crisis.

The sovereign wealth fund claims the trades were “unsuitable” and the LIA had “no need for transactions with a high degree of risk,” according to the Financial Times. It has accused Goldman Sachs of exploiting the fund’s inexperience and profiting while the fund lost out.

Goldman Sachs denies the allegations. “We continue to believe this case is entirely without merit and intend to contest it vigorously as it moves through the legal process,” the firm told CIO. In court documents, it called the lawsuit a “paradigm of buyer’s remorse.” According to Bloomberg, the bank said the LIA “freely entered into commercial bargains which have turned out badly for it.” It also pointed out that the fund’s advisory board included several noted financial names such as investment banker Lord Jacob Rothschild and economist Sir Howard Davies.

The case first came to light in January, when the LIA accused Goldman Sachs of using “extensive expenses” to fund trips to Morocco to entertain former high-level LIA officials, according to a September report in the Financial Times. The paper reported that Goldman admitted funding trips to Morocco, but argued that the LIA had been fully aware of their nature.

In August, Goldman Sachs withdrew an attempt to have the lawsuit thrown out.

The case is being heard this week in the High Court of Justice in London, and the LIA has asked for a trial to begin in January 2016.

The LIA was founded in 2006 by Libya’s then-leader Muammar Gaddafi, and has been attempting to rebuild itself following the 2011 revolution and Gaddafi’s death. According to its website, it is planning to fill a number of senior positions by the end of the year, including CEO and CIO.

In March this year, Och-Ziff Capital Management was named in a US Securities and Exchange Commission investigation into activities linked to the LIA.

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