Australian hedge fund files $1b lawsuit against Goldman Sachs

10:09, June 11, 2010      

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The manager of an Australian hedge fund is suing US investment bank Goldman Sachs for more than $1 billion over a bad product it claims made it bankrupt, a lawyer said Thursday.

Basis Capital's Yield Alpha Fund went bust after losing $56 million in two weeks on the "Timberwolf" collateral debt obligation (CDO), sold by Goldman Sachs dealers who knew it would fail, lawyer Eric Lewis said.

"They knew that they were shaky, they were assembled to be shaky to take some of the worst securities off their books and put the risk on somebody else," Lewis told Australian public radio from Washington.

"It was done at a time when Goldman's own internal e-mails showed they had absolutely zero confidence in the CDO market, and they knew it was going to fail, the only question was when," he said.

The case echoes a civil fraud suit filed against Goldman in April by the US Securities and Exchange Commission accusing the investment banking giant of "defrauding investors by misstating and omitting key facts" about a similar product based on subprime mortgage-backed securities.

"I think Goldman and the investment banks have really lost their way in terms of their movement from honorable server of customers to essentially being a kind of buyer-beware dealer in a casino where they're the house and everybody else loses," Lewis said.

Goldman dismissed the legal action as a "misguided attempt by Basis to shift its investment losses to Goldman Sachs.

"Basis made its investment at market levels, levels that it deemed attractive," a spokesman said.

Source: Global Times

(Editor:黄蓓蓓)

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