Judge rejects Libya fund’s claim it was duped by Goldman Sachs

Britain’s High Court on Friday rejected a $1 billion lawsuit against Goldman Sachs by the Malta-based Libyan sovereign wealth fund, which accused the investment bank of duping it into risky deals.

The Libyan Investment Authority (LIA) alleged that Goldman Sachs made hefty profits by taking advantage of the fund’s inexperience to persuade it to make high-risk derivative trades in the period before the 2008 global financial crisis. Its lawyers said Goldman Sachs made more than $200 million in four months in 2008, while the authority lost an entire $1.2 billion investment.

The fund’s lawyer, Roger Masefield, told a hearing earlier this year that Goldman Sachs made “eye-watering profits” by taking advantage of the authority’s “lack of sophistication”. Attorneys also claimed that Goldman Sachs wooed the fund’s managers with lavish corporate hospitality and foreign trips – and even prostitutes.

Goldman Sachs denied any wrongdoing.

High Court Judge Dame Vivien Rose said she dismissed the claim that the disputed trades were the result of “undue influence” by Goldman Sachs. She said that although the authority may have made unsuitable investments, it was no different “from many other investments that the LIA made over the period in that regard.” Goldman Sachs said it was pleased with the ruling, which it called “a comprehensive judgment in our favour.”

The LIA said it would continue to fight because “Libya’s wealth must be returned to the people of Libya.” The €61 billion fund was set up by the late Libyan leader Moammar Gaddafi in 2006 to invest the country’s oil wealth. He was deposed in 2011.

In a statement, the LIA explained: “The London High Court has today ruled that the Libyan Investment Authority (LIA) has lost its case against Goldman Sachs. The action was brought in early 2014 by earlier leadership of the LIA and alleged that Goldman Sachs had wrongfully exploited the LIA in trades in 2007 and 2008.”

Commenting on the decision, the President of the Interim Steering Committee of the LIA, Dr Ali Mahmoud Hassan, said: “The Libyan Investment Authority undertook a strategy to secure its assets and grow their market value. The leadership of the LIA has always been clear that it would do all it could to pursue those who exploited the fund in the late 2000s. As a first step, the LIA embarked at the end of 2013 on pursuing court cases against Goldman Sachs and Société Générale.

“Today’s ruling will not break our resolve and we remain focused on the other litigations raised by the previous Board of Directors to put right the wrongs suffered elsewhere in the past. Libya’s wealth must be returned to the people of Libya.”