Subsequent to the recent report of the case taken by the Libyan Investment Authority (LIA) against Goldman Sachs, the LIA has issued the following statement detailing its case against the bank:
The full extent of the LIA’s case against Goldman Sachs was detailed recently, with the serving of the legal claim and its particulars on Goldman Sachs. This follows the submission by the LIA to the High Court in London last week. The claim rests on disputed equity derivatives trades, amounting to in excess of $1 billion. These trades expired as worthless in 2011 despite delivering immediate and disproportionate profits to Goldman Sachs. These profits are estimated to be in the range of $350 million.
The central charge is that Goldman Sachs deliberately exploited the relationship of trust and confidence it had established with the Libyan Investment Authority in order to cause the LIA to enter into each of the disputed trades.
The legal papers submitted by the LIA note the huge imbalance between Goldman Sachs’s sophisticated financial expertise and the LIA’s extremely limited in-house financial and legal experience; the LIA being a newly formed sovereign wealth fund that became operational during the last years of Gaddafi-era Libya.
From late 2007 until well after the disputed trades took place, Goldman Sachs employees were extensively involved in self-described training and development of the team at LIA, had unfettered access to its offices, systems, and information, and also provided extensive corporate hospitality for LIA employees.
The legal papers also note that the exploitative trades were inadequately documented by Goldman Sachs, with the details of the actual trades undertaken being provided to the LIA weeks (and in some cases, months) after the trades were executed. When the LIA received these trade details and begun to understand the true nature of the disputed trades, it became clear the trust and confidence placed in Goldman Sachs had been abused.
Mr. AbdulMagid Breish, Chairman of the LIA since June 2013 said, “The unique circumstances allowed Goldman Sachs to take advantage of the LIA’s extremely limited financial and legal experience, to deliberately exploit its position of influence, and to take advantage in a way that generated colossal losses for the LIA, but substantial profits for Goldman Sachs. While Goldman Sachs was orchestrating these unjustly exploitative transactions, it repeatedly told the LIA that it sought a long-term relationship with the LIA as a strategic partner. This was untrue. Today, the LIA, as the sovereign wealth fund of Libya, is seeking the recovery of these substantial funds as it seeks to invest and generate wealth for the people of Libya as the country continues its development following the revolution of 2011.”