Libya’s sovereign wealth fund took Goldman Sachs to court in London on Monday to recover $1.0 billion (796 million euros) from a series of derivatives trades made during Moamer Kadhafi’s regime.
The Libyan Investment Authority claims that its international inexperience and a relationship of trust with the bank was “exploited” by Goldman Sachs, which disputes the allegations.
The Wall Street bank allegedly made $350 million in up-front profits from the trades.
The claim relates to deals made in 2008 under Kadhafi in the few years between the country opening up to Western investments and the dictator’s bloody ouster in 2011.
The LIA invested $1.0 billion in the disputed trades, which were worthless by the time they had matured in 2011, and is now seeking to recover that sum as compensation.
It said in court documents seen by AFP that the Wall Street bank used its influence to “drive through a series of complex derivative investments which, whilst extremely profitable for GSI (Goldman Sachs International), were inherently unsuitable for a sovereign wealth fund like the LIA”.
But Goldman Sachs has argued that LIA representatives knew well the risk of the trades, saying in its court filing that the fund included “highly experienced banking professionals”.
“The disputed trades were not difficult to understand,” it said, adding that they had “a clear commercial logic”.
“This claim is a paradigm of buyers’ remorse,” it added, blaming the loss-making trades on the huge disruption on the markets caused by the global financial crisis.
“We continue to believe this case is entirely without merit and intend to contest it vigorously as it moves through the legal process,” Goldman Sachs said in a statement.
Monday’s hearing was set to continue into Tuesday and the LIA said it was expecting a trial to begin next year unless the two sides can settle the claim out of court beforehand.
Despite the war, Libya’s SWF is estimated to be worth over $60 billion.