The Libyan Investment Authority is seeking $1.2bn (£840m) in damages from investment bank Goldman Sachs over allegations that the bank misled the government-managed sovereign wealth fund into making a series of bad investments in 2008.
The LIA claims that Goldman Sachs encouraged it to make derivatives transactions which resulted in a $1.2 billion loss when the contracts came to maturity in 2011. The fund was created in 2006 under Col Muammar Gaddafi to invest proceeds from Libyan oil sales – by 2007 it had over $35 billion in funds.
The LIA lost almost everything through the trades, while Goldman Sachs generated “eyewatering” profits of over $200 million, according to Roger Masefield, a QC for LIA.
The trial started on Monday at the High Court in London before Justice Vivien Rose – it is expected to last several weeks.
A document submitted to the court by the LIA said:
“The disputed trades were inherently unsuitable for a nascent sovereign wealth fund such as the LIA and Goldman Sachs knew (or at the very least suspected) that the LIA did not properly understand the trades, which were highly structured, complex and risky.”
However, Goldman Sachs said that the allegations made by LIA are without merit.
“The LIA selected the underlying stocks based on its own research, conducted over weeks or months, and did so because, like other Middle Eastern sovereign wealth funds, it thought they were undervalued,” Goldman Sachs said in a document submitted to the court.
