Lawsuit against Goldman ‘without merit’
(11 June 2010 – Australia) Goldman Sachs has said that the lawsuit pending against the investment bank by failed hedge fund Basis Yield Alpha Fund (Master) (BYAFM) is ‘without merit’ and based on ‘false allegations’.
A billion-dollar lawsuit has been launched by the Australian hedge fund after investing US$78 million (A$91 million) in two tranches of Timberwolf collateralised debt obligations (CDO) in June 2007.
The CDO’s sold to the hedge fund were described in internal Goldman emails as ‘one shitty deal’ and within five months of its debut, the CDO had lost 80 percent of its value, and it was liquidated in 2008.
The hedge fund claims that Goldman Sachs made false representations in the sale of the securities, which has been assembled to fail.
Goldman Sachs has hit back saying the lawsuit is ‘without merit and based on ‘false allegations’.
In a statement the investment bank said that the lawsuit is a misguided attempt by Basis, a hedge fund that was one of the world's most experienced CDO investors, to shift its investment losses to Goldman Sachs.
At the time of the Timberwolf transaction, Basis specifically stated it would not place any reliance on Goldman Sachs, and this decision formed part of the agreement Basis signed, the investment bank continued.
Basis made its investment at market levels - levels it deemed attractive and these levels were substantially below the face value of the securities and consistent with where other investors were purchasing the same Timberwolf securities during the same time period, added the investment bank.
Basis is now trying to recoup its losses based on false allegations that it was misled about aspects of the transaction and market conditions, Goldman noted.
The investment bank also highlighted the fact that they were also exposed to the same Timberwolf securities and lost ‘several hundred million dollars as a result’.
BYAFM is seeking at least $US56 million in damages, and more than $US1 billion in punitive damages.
The CDO’s sold to the hedge fund were described in internal Goldman emails as ‘one shitty deal’ and within five months of its debut, the CDO had lost 80 percent of its value, and it was liquidated in 2008.
The hedge fund claims that Goldman Sachs made false representations in the sale of the securities, which has been assembled to fail.
Goldman Sachs has hit back saying the lawsuit is ‘without merit and based on ‘false allegations’.
In a statement the investment bank said that the lawsuit is a misguided attempt by Basis, a hedge fund that was one of the world's most experienced CDO investors, to shift its investment losses to Goldman Sachs.
At the time of the Timberwolf transaction, Basis specifically stated it would not place any reliance on Goldman Sachs, and this decision formed part of the agreement Basis signed, the investment bank continued.
Basis made its investment at market levels - levels it deemed attractive and these levels were substantially below the face value of the securities and consistent with where other investors were purchasing the same Timberwolf securities during the same time period, added the investment bank.
Basis is now trying to recoup its losses based on false allegations that it was misled about aspects of the transaction and market conditions, Goldman noted.
The investment bank also highlighted the fact that they were also exposed to the same Timberwolf securities and lost ‘several hundred million dollars as a result’.
BYAFM is seeking at least $US56 million in damages, and more than $US1 billion in punitive damages.
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